CNB Governor warns against huge dividend outflows

While the Czech crown continued trading sideways at the beginning of this week, it seems that the weaker dollar has helped the currency this morning. As a result the EUR/CZK pair dipped below the 24.10 level.
Interestingly, the koruna extends its gains despite higher-than-expected C/A deficit. It reached CZK 6.5bn and the main negative item was the huge dividend outflow, which is quite usual during spring. In this respect, it is worth noting that CNB Governor Singer warned that high dividend payments form bank profit pose risks for the banking sector in the near-term. At the same time, CNB’s new stress tests showed that Czech banks will be able to withstand a wide range of risks.


Forint corrects and recovers
The Hungarian forint had a bit of a correction on Friday and weakened almost 1% during the day from close to 264 to as low as 266. Better equity market sentiment however helped it to recover quickly this morning and it opened above the key 265.00 level. It has been testing this level for a week now and this week’s question could be whether it continues to appreciate towards this year’s high of 263.10 or not.
Farm prices showed a bit of easing in April and lowered to 45.2% Y/Y from 48.2% Y/Y in March. Lower agricultural prices could mean the end of the trend that has been pushing up inflation for almost a year now. If agricultural prices moderate, inflation may come down from the current high levels, pointing for lower headline inflation towards the year-end. It may however still be above the central bank’s projected 3.5% Y/Y level, hence it could be interesting how the central bank sees the situation next week.
EUR/HUF. Can the forint go for a test of this year’s highs?




The Polish zloty continues trading in a tight range as the market waits for key domestic economic releases. The first one will be an outcome of the April current account balance, which will be released this morning (EUR 550mn deficit is expected). The second and more important one will a figure of the May headline inflation. We think that the headline CPI should stabilize at the April level, which should lead to more cuts in rate hike expectations.