On Wednesday, the euro zone debt tension fuelled risk aversion and weighed on Central European currencies - the EUR/CZK cross rate hit the highest level since July 2010. Meanwhile, the zloty and the forint weakened to 4.40 EUR/PLN and 311 EUR/HUF respectively. Technically, it is important that the EUR/CZK currency pair broke above two important resistances at 200- weeks moving average (25.29) and this years highs (25.38) respectively. Hence, the koruna opened the room for further depreciation to as high as 26.08 EUR/CZK.
Interestingly, at the press conference after NBP’s Monetary Policy Council meeting, its president Marek Belka complained that the zloty for sure had not helped the central bank to curb inflation. He also signalled that the NBP is ready to step into the market as he said that the possible presence of the central bank on the currency markets would moderates ‘hot heads’ that were there. Let us remind that the NBP intervened twice in favour of the zloty in September – for the first time at above 4.5 EUR/PLN and for the second time approximately at current levels. Beside that, there were further interventions of state-owned BGK bank which holds euros from EU funds. Therefore, we do believe that either the NBP or BGK will not allow for further significant depreciation of the zloty.
Beside that, the NBP delivered an expected outcome as it decided to keep interest rates unchanged at 4.5%. Belka said that interest rates may stay unchanged in months ahead (which is our base scenario too) but added that the central bank was ready to make adjustments if needed. Regarding the other news, Poland’s finance minister Rostowski said yesterday that Poland would stick to its promise to EU and would push general government deficit below 3% of GDP even if the economy displays a negative GDP growth of 1%.