- Polish zloty posted losses in third consecutive session
- Czech retail sales in January grew faster than expected
Regional currencies slid against the euro on Thursday. Although the risk appetite has generally improved in 2012, the strengthening U.S. dollar weighed on CE currencies as the situation when EUR/USD was gaining on improving sentiment on risk is being replaced by the theme of a cyclical rebound of the U.S. currency. The Polish zloty was the biggest looser and the EUR/PLN cross rate surged above 4.15 level. Significantly higher deficit of the current account in January released earlier this week also probably further weighed on the zloty as well.
Recent set of relatively unfavourable data was visible also in the Polish bond market - 10Y government bond yield rose by 7 basis points. More specifically, slightly higher inflation in February, and a significant upside revision of expected inflation in the new NBP inflation report (+1 percentage point in comparison with the November’s report, the estimate stands at 4.1% for 2012 which is slightly higher than in our scenario) might further weigh on Polish bonds in months ahead.
Today, the figure on Czech retail sales was released - the headline figure reached 1.3% Y/Y in January. Although the figure indicates that the Czechs are willing to spend some money, we think that it might be misleading to pay too much attention at January’s result. Rather contrary, we expect domestic demand to remain muted throughout 2012 due to the decline in real wages.