- Polish BGK bank intervenes in favor of the zloty
- Czech PMI at the lowest level in nearly three years
On Thursday, the most exciting news came from Poland. Apart from the figures on GDP for the first quarter (see Thursday’s daily), Reuters cited traders who said that the state-owned BGK bank was seen in the market selling euros. It is quite a surprise as Mr. Belka, the governor of the National Bank of Poland, had said earlier this year that BGK will seek to limit exchanges of euros in the second and the third quarter and would do more through the central bank. The bank was selling EUR/PLN at 4.40, i.e. at about the same level as in the end of previous year. However, we think that the risks for the zloty are skewed on the downside. Our short-term target for the EUR/PLN cross rate is 4.50.
Regarding freshly released regional PMI figures, the biggest surprise came from the Czech Republic as the overall index fell to the lowest level since August 2009. Moreover, especially worrying is the development in new orders (both from abroad and domestic) which fell significantly. Hence, the latest set of data is more or less in line with the weaker than expected result of the Czech economy in the first quarter (recall that the Czech economy contracted by 1 percent Q/Q; market expected 0.1 percent growth) and thus further supports our bet on an interest rate cut at the next CNB meeting (June 28th).
