On Friday, the Central European currencies saw a mixed trading. While the koruna closed barely changed just shy of the technical level at EUR/CZK 25,635, the zloty and the forint in particular weakened. EUR/HUF currency pair edged lower on comments of Economy Minister Maltocsy, who wrote in a column that the country was wrong when aiming at low inflation at the cost of a strong forint.
Let us recall that Mr. Maltocsy is, according to the local press, among possible successors of the current central bank Governor Simor whose term expires early in March. As a result, the forint hit a seven-month low on Friday and technically opened a room for further depreciation to EUR/HUF 300. Meanwhile, yield of 10Y government bond rose by 17 basis points.
Although the Central European currencies usually draw support from the gains of the single currency (short-term, sentiment on the euro has clearly improved after Draghi’s comments), we don’t see much room for appreciation, especially in case of the koruna (due to dovish CNB, we actually bet rather on further weakening) and the forint (see above). The Polish zloty may be an exception; early this morning, a (hawkish) member of the Monetary Policy Council, Adam Glapinski, said the central bank would consider only one more rate cut while markets price in an additional 70 basis points decrease in 3M Wibor during 6-9 months ahead.