Central European currencies stay under pressure as eurozone crisis seems far from resolved. Typically, the zloty and the forint are more vulnerable to the global nervousness. Nevertheless the prospects for the koruna may be gloomier now as it cannot expect intervention from local authorities. In contrast, the Hungarian forint weakness may trigger interest rate hikes (we see a possibility of 50 bps hike) and the Polish zloty may be once again defended via interventions of the NBP and BGK. On the other hand the Czech koruna is still relatively strong and given deteriorating outlook for the Czech economy, CNB may welcome further weakness of the koruna. Hence, one could easily believe the Czech koruna´s regional outperformance is nearing to the end.
On Friday, Polish central bank governor reminded to markets that Poland is exceptionally immune to the crisis and that we may see even rating upgrade, if re-newed coalition introduces bold fiscal reform. Although we consider Poland the most resilient in real terms, we are far less optimistic than Mr. Belka and consider his comments rather a wishful call than description of reality.
Today, the September Czech industrial output came out weaker than expected as 2.5% y/y growth is slowest since December 2009 while the automotive industry remains the single growth engine. Surprisingly, we saw a rebound in foreign orders and higher foreign trade surplus. Nevertheless both exports and imports continue to decelerate. Although the Czech foreign trade balance should once again hit new records this year, the positive effect on GDP may be largely offset by weaker domestic demand.