On Monday, Central European currencies erased Friday’s losses. The Czech koruna
dipped to 25.70 EUR/CZK, whereas the zloty
stayed above 4.50 EUR/PLN, i.e. at levels that might trigger interventions of BGK or NBP. The Hungarian forint
outperformed its peers ahead of the MNB policy meeting and EUR/HUF cross rate dipped below EUR/HUF 310 level.
Meanwhile Czech Minister of Finance Kalousek said yesterday that expectations of economic growth in 2012 reaching tenths of a percent might be rather optimistic (our estimate stands at 0.5 %). Let us remind that the budget for the next year is based on the growth of 2.5 %.
Today, the eye-catcher undoubtedly is the MNB interest rate decision (due to 2 (1 2410
CZK, -0,32%) CET). FRAs (6x9) are now above 7.6%, so about a 100bp rate hike outlook is being formulated. The risk is that the central bank believes in the IMF agreement and remains in wait-and-see mode. The recent downgrade from Moody’s and the ongoing weakness in HUF
could be a trigger for at least a 50bps hike today. If this was not the case, the markets might be easily disappointed and the sell-off of the forint