CE currencies de-coupled yesterday as the Czech koruna continued to weaken, while the Polish zloty gained slightly. The above divergence was allowed thanks to a verbal intervention coming from the Polish MinFin as its deputy indicated that the Ministry would accelerate its sales of foreign currencies – either US dollars received from a recently issued government bond or euros from EU structural funds.
As concerns macro fundamentals, there have been releases of the September foreign trade in Hungary and the October inflation figures in the Czech Republic. Both reports surprised a little bit. While the Hungarian foreign trade showed higher than expected surplus (EUR 741.5mn), the Czech inflation was surprisingly high too. As concern the Czech headline inflation, it increased 0.3% m/m, which means that the year-on-year inflation moved backed above the central bank target. Although the uptick in inflation was driven mainly by food and gas prices, we think that the October headline figure might cool rate-cut calls, which re-appeared in the CNB Bank Board.
Later today, the regional eye-catcher should be the NBP interest-rate setting meeting. It is quite certain that the MPC will leave the official rate unchanged, although there was a visible decline in headline inflation in September. Still, the zloty remains relatively weak and that’s the issue, which will not allow the NBP to consider easing of its monetary policy.