Koruna and zloty remain steady, planned FX loans interventions make forint vulnerable

On Friday, like for most of the past week, the Czech koruna moved in a narrow band. And the trading pattern hardly changes this week. Nor in Poland are we expecting significant changes in placid holiday sentiment. The calendar is relatively empty, with Tuesday´s release of fresh retail sales data representing the only keenly awaited event in Poland.

In Hungary, though, things look different. Last week on Tuesday, the government announced plans to help households convert their FX loans to forints. Details were not revealed yet and uncertainty makes markets rather nervous. On Friday, the development gained additional momentum, as the chief executive of the OTP bank, Sandor Csanyi, sold majority of his interest in the bank. Market participants have speculated that there may be causal relationship rather than pure coincidence between the stock selloff and government plans regarding FX loans.

No doubt that this week´s focus will be on the government meeting on Wednesday, which might cast better light on the whole issue, namely possible future costs of the planned measure to be borne by commercial banks. Until then, the forint likely remains under pressure. Also this week, a regular meeting of the Hungarian central bank takes place. I our opinion, the NBH is not going to surprise markets and hence cuts its base rate to the new all time low at 4 %, as markets expects.