This morning, retail statistics for Hungary were released, followed by industrial production and foreign trade statistics for the Czech Republic. Indeed, it’s been a busy data week for both countries, with the National Bank of Poland’s interest rate decision announced on Thursday (no change expected) and a key governor press conference scheduled for Friday. Also keep an eye on Hungary’s inflation rate. Core inflation should fall to 4.1% from 4.4% year-on-year, although a slight increase is expected from 3.6% to 3.7%.
In the foreign exchange market, Friday’s US statistics shuffled the cards again. The decline in global interest rates led to an increase in CEE interest rates, reducing inequality. Therefore, further appreciation in EUR/USD may not be as positive news for the region’s currencies as it seems. In our view, HUF has been ignoring interest rates for some time and Friday’s move will only increase its overvaluation. Due to the release of data in Hungary this week, EUR/Forint could fall back to HUF 393, and in our view, the forint is currently the most susceptible to declines in the Central and Eastern Europe region.
EUR/CZK briefly fell below 25.0, but as mentioned above, the current re-pricing after last week’s CNB meeting is quite dovish and negative for CZK. Therefore, the level is often seen around 25.10. PLN is the only currency in the region that is likely to see any appreciation in the coming days. In particular, a hawkish NBP could add momentum to PLN’s outperformance in CEE countries and move back toward EUR4.30/PLN.
František Taborski
