A picture from regional forex markets has not changed as the Czech currency has continued to underperform other CE currencies. While we believe that a reason behind the koruna’s weakness is an expectation that the CNB is going to cut tomorrow, we think that it is too premature to jump to conclusion that a carry trade with regional currencies of this kind of divergence. We believe that external environment is too risky to play such carry trades. The Hungarian Central bank left its key rate unchanged at 7.0% as was expected widely yesterday. The Monetary Council again emphasised low growth that may contain inflationary pressures from tax increases. They also highlighted that risk premia is an important factor and this may decline if negotiations with the IMF/EU start. It looks likely that even some CEE central banks are considering a rate cut, it can only happen in Hungary with the IMF agreement. This could also mean that markets could remain volatile after talks start because the government and the IMF may not agree on all issues and this may out a quick agreement unlikely. Looking at other regional data it is worth noting that the Polish retail sales rose in May by 7.7% y/y or slightly above the market consensus of 7.3% y/y. We suspect that the EURO 2012 Championship could be behind the relatively strong figure in May, which could be the same case in June too.