Czech central banker Holman sees current outlook too pessimistic and Polish figures in focus this week

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Currencies: Czech central banker Holman sees current outlook too pessimistic
News: Polish figures in focus this week

Czech Republic

After a few day's flirting with 200 days moving average at 25.12, the Czech koruna finally breached through the technical level and closed almost 0.5 % weaker at 25.17 EUR/CZK on Friday. The Czech National Bank (CNB) board member Robert Holman said on Friday that an interest rate hike should probably take place around mid 2011, earlier than suggested by actual inflation report. Holman also said that official forecast of economic growth for the next year were too pessimistic in his view. Nonetheless, Holman as well as his fellow board member Tomsik expect interest rates to remain flat in the near future.

This week is rather empty and we believe producer prices as well as current account should be widely ignored.

Regarding trading, we expect that rising global yields should weigh on the Czech koruna. Technically speaking, currency pair EUR/CZK could move further to 25.5 EUR/CZK. In our view, CNB board meeting scheduled for next Wednesday (22.12.) might help the koruna to win back lost positions.

Currencies		change
EUR/CZK	25.20	0.4%
EUR/HUF	278.4	0.2%
EUR/PLN	4.021	-0.2%
USD/PLN	3.055	0.5%
EUR/USD	1.320	-0.7%
USD/JPY	84.2	0.6%

Bonds 2Y		change
Czech Rep.	1.87	0.11
Hungary 3Y	7.84	0.01
Poland	4.71	-0.02
Slovakia	1.98	0.06
Eurozone	1.13	0.10
USA	0.67	0.07

Bonds 10Y		change
Czech Rep.	3.94	-0.03
Hungary	8.05	0.02
Poland	6.02	0.00
Slovakia	4.39	0.19
Eurozone	2.99	0.06
USA	3.36	0.17

Hungary 

The Hungarian forint remained broadly unchanged on Friday and the pair remained within the range between 277 and 279. There is not much to expect in Hungary in the next weeks, but a possible downgrade from Fitch could have a negative effect, which will only be temporary as the move from Moody’s weakened the currency for only two days.

The bond market had a minor correction during the day and yields rose about 5bps to the 7.90% level at the long-end. The market may have a tint of weakening before the auctions on Thursday, but we expect good demand at the current high yield levels.

Poland

The Polish zloty firmed slightly on Friday and moved to 4.03 EUR/PLN. This week is literally stuffed with domestic macro releases, which might crucially influence next week's NBP decision. Today, the result of October's current account will be released. CPI inflation for November will be announced on Tuesday. Labor market statistics (employment, real wages) will be announced on Thursday. Finally, figures on industrial production and producer prices will be released on Friday. Especially employment and industrial production data should be in focus and we believe these to confirm strengthening recovery.

As far as this week's trading is concerned, we expect that the zloty should be rather under the pressure of global sentiment. Nevertheless domestic data may cap the losses ahead of NBP meeting scheduled for next week.
http://www.kbc.be/dealingroom
Full report: Czech central banker Holman sees current outlook too pessimistic and Polish figures in focus this week