The Czech koruna was slightly weaker on mounting tensions in the euro zone peripherals. The pair still stays very close to its two-month lows and below 55-day
moving average (24.35 EUR/CZK), which rather opens space for further Koruna gains in the near term.
Nevertheless the koruna may be somewhat hesitant to extend gains, if we see the CDS’s on the euro zone peripheries increase further. The domestic calendar is empty for the week ahead and the politics should not weigh much on the market as the current political crisis so far does not seem to lead to early elections.
Poland: NBP’s Gilowska - core inflation matters
The Polish zloty traded sideways on Friday. The EUR/PLN currency pair was hovering at 3.95 EUR/PLN level, i.e. close to the 2-months lows.
Zyta Gilowska, a Monetary Policy Council member, said on Friday that a rate hike in May or June cannot be ruled out. She said that the decision would be determined mainly by the core inflation reading which will be released on Wednesday. Gilowska also said that the central bank was certainly not close to the end of the monetary policy tightening cycle even though the inflation had been primarily driven by global factors rather than domestic demand.
Regarding market expectations, the spread between FRA 6x9 and three month WIBOR currently reaches 80 basis points. We bet on two more hikes this year. Hence, we think that market expectations are overly hawkish.
Hungary: Central bank meets today
The Hungarian forint is waiting for the central bank decision due 1400CET today.
This will be the second meeting with the new members, but the first one where all four new members will vote. The forint is roughly at the same level where it was last month, while inflation inched up from 4.1% Y/Y to 4.5% Y/Y in March on higher food and energy prices. Core inflation also rose from 1.9% Y/Y to 2.5% Y/Y, thus it will be interesting to see how the Monetary Council assesses the situation.
Economists, including us, expect an unchanged base rate of 6%.