Negative sentiment on global markets continued to weigh on the CEE currencies yesterday, but the positive closing of US markets brought a sense of hope that this may not last forever. While the Czech koruna and the Polish zloty remained above the record lows seen two weeks ago, the Hungarian forint slid to a new record low of 300.20/€. As usual, rates have been following the exchange rate closely in Hungary and short-term rates have priced in 100bps rate hike for the next 3-months. The central bank discussed the possibility of a 25bps rate hike on the September meeting, but it did not get majority. This suggests that the idea was proposed by one of the three old members, while recently appointed four was against it because we suspect that the new members vote together. The rate hike outlook is not just bad and it could help to stabilise the forint and may also help to make long-term bond more attractive. Yesterday, the 5y5y forward spread over the euro compressed by about 35bps from 520bps to 485bps. This means that the market has become tad more optimistic about the long-term outlook, which is usually a prerequisite of a stabilisation and recovery process.