Despite the overall gloom, Central European currencies managed to avoid larger losses on Tuesday. As regards the meeting of the Hungarian central bank (MNB), it left its base rate unchanged at 7%. Governor Mr Simor said that there was more pressure for a rate cut than before, but majority voted for hold. This we think could mean a 5-2 result after 6-1 in June. The central bank also emphasised the external risk assessment as the main reason behind rate decision. This could mean that the central bankers are afraid of deepening euro crisis that combined with eventual rate cut may pose a significant risk for bonds’ prices (i.e., it could affect yields negatively).
As regards the fresh Ifo figure, it came out below market expectations. Generally speaking, we think that the risks for Central European currencies are skewed towards further weakening. In the case of the Czech koruna, we maintain our short-term target at EUR/CZK 26.0. As for the forint, the currency is hovering around EUR/HUF 290, loosing some 2% over 2 weeks.