On Thursday, the Central European currencies saw another calm session and were barely changed even after the surprisingly soft Draghi’s comments following the release of more pessimistic ECB forecast on GDP growth in 2013. The zloty however breached back above EUR/PLN 4.12 level while yields of polish bonds hit a new all-time high due to prospects of further monetary easing.
The possible impact of prospective ECB monetary easing in eurozone on the Central European markets should be muted. On one hand the eventual easing could inspire regional banks to follow ECB, especially if interest rate differential helps regional currencies. Nevertheless that does not have to be the case. More aggressive ECB easing could help US dollar and stronger dollar usually weighs on regional currencies. If the CNB sees the koruna staying in defensive, it should have no reason to launch foreign exchange interventions. In case of Hungary and Poland, the situation is different and we believe only significantly weaker currencies would prevent the central bankers from further monetary easing.