The Czech koruna extended its gains yesterday and moved briefly below 24.10 EUR/CZK. It was a session where global markets were playing relief story and risk aversion was declining. It goes against the theory of carry trades financed from the low yielding Czech koruna and only shows how difficult it is to find any stable relationship (correlation) for the current movements of EUR/CZK.
The technical picture after breaking below 55-day moving average (around 24.35) now looks positive and the Czech koruna should stay in a new range 24.90-24.35 for a while. Nevertheless at these strong levels we expect the CNB to remain clearly dovish and this should sooner or later weigh on the Czech currency.
The Hungarian forint strengthened sharply yesterday on the back of improving sentiment on global markets. The pair jumped from 268 to 265 or more than 1% intraday.
Central bank data shows that foreign investors have become positive on the forint and bought more than Ft1trn since last September. The appreciation of March was driven by Ft350bn buying by foreign investors. Overall, it seems that the government’s fiscal consolidation efforts are bearing fruits now and we may have a stable and strong currency in the future.
Wages accelerated slightly in February and overall wage growth was 4.8% Y/Y faster than the 1.6% Y/Y rate in January. Some wage acceleration is in line with the economy’s growth momentum, so should be no surprise for the central bank and the current level can be seen as compatible with the 3% inflation target.
The Polish zloty erased a part of previous losses and the EUR/PLN currency pair edged back to the 3.96 EUR/PLN level.
After the surprisingly high consumer inflation reading for March, the figure on producer inflation surprised to the upside as well. PPI inflation reached 9.3% on year-onyear (y/y) basis in March and topped market expectations by about one percentage point. On the other hand, industrial production disappointed as it rose only 7 % y/y.
Clearly, the Polish economy has been experiencing a cost-push shock. Given the fact that the domestic demand remains muted we think that the rate hike in May is unlikely. Therefore we expect that the zloty could stay close to current levels in the sessions ahead.