FX slightly up, Czech crown recovers from 8-week low
WARSAW, June 28 (Reuters) -Central Europe's currencies rose on Friday, with the crown recovering some ground after falling to eight-week lows when the Czech central bank delivered a fourth-straight 50-basis-point interest rate cut that only a minority in the market expected.
The crown had closed around 0.7% lower on Thursday after the Czech National Bank (CNB) cut its key two-week repo rate to 4.75%. The decision caught many off guard, as most analysts polled had expected a smaller 25-basis-point reduction.
The bank, while opting for a bigger cut now, signalled a likely slowdown in its easing cycle that started last December, lending some support to the currency, which is still ending the quarter stronger than the bank's assumptions.
The crown is also set for its first quarterly gain since the start of 2023, after firming in recent months due to investors scaling back rate cut expectations.
Goldman Sachs, though, said weakening underlying inflation dynamics could mean the Czech central bank will cut rates over the next year more than markets currently price.
At 0843 GMT, the crown EURCZK= was up 0.1% against the euro at 25.0260.
Bank CSOB said Thursday's rate cut, along with French election jitters, will keep the crown under some pressure.
The Czech decision comes as other central banks in central Europe slow rate cuts or keep policy on hold as service prices continue to rise and major central banks' easing paths remain uncertain.
In Hungary, the central bank has also slowed its easing pace.
The forint EURHUF=, which has been central and eastern Europe's worst performing currency this year with a 3% drop, was 0.4% firmer at 395.2500 per euro on Friday.
"Markets are calm, so my guess is that the forint firms due to the widening rate difference between the forint and the crown," a local trader said.
The zloty firmed 0.2% to 4.3085. Inflation PLCFY=ECI in Poland was slightly higher than expected in June, a flash estimate showed on Friday, as food prices rose. But it is set to rise further in the coming months.
Investors will be looking ahead to key U.S. inflation data later in the day for clues on the timing of Federal Reserve interest rate cuts, as well as results of the first round of general elections in France over the weekend.
Stock markets in the region rose, with the Warsaw main index .WIG20 and Prague's .PX gaining 0.8%.
CEE MARKETS | SNAPSHOT | AT 1043 CET | ||||
CURRENCIES | ||||||
Latest | Previous | Daily | Change | |||
trade | close | change | in 2024 | |||
EURCZK= | Czech crown | EURCZK= | 25.0260 | 25.0570 | +0.12% | -1.30% |
EURHUF= | Hungary forint | EURHUF= | 395.2500 | 396.8000 | +0.39% | -3.05% |
EURPLN= | Polish zloty | EURPLN= | 4.3085 | 4.3160 | +0.17% | +0.84% |
EURRON= | Romanian leu | EURRON= | 4.9775 | 4.9775 | +0.00% | -0.06% |
EURRSD= | Serbian dinar | EURRSD= | 116.9300 | 117.0300 | +0.09% | +0.27% |
Note: daily change | calculated from | 1800 CET | ||||
Latest | Previous | Daily | Change | |||
close | change | in 2024 | ||||
.PX | Prague | .PX | 1537.48 | 1524.8600 | +0.83% | +8.73% |
.BUX | Budapest | .BUX | 71759.18 | 71492.81 | +0.37% | +18.38% |
.WIG20 | Warsaw | .WIG20 | 2568.70 | 2547.78 | +0.82% | +9.63% |
.BETI | Bucharest | .BETI | 18100.43 | 18057.78 | +0.24% | +17.76% |
Spread | Daily | |||||
vs Bund | change in | |||||
Czech Republic | spread | |||||
CZ2YT=RR | 2-year | CZ2YT=RR | 4.0170 | -0.0220 | +120bps | -3bps |
CZ5YT=RR | 5-year | CZ5YT=RR | 4.0270 | -0.0300 | +157bps | -4bps |
CZ10YT=RR | 10-year | CZ10YT=RR | 4.1740 | -0.0150 | +172bps | -2bps |
Poland | ||||||
PL2YT=RR | 2-year | PL2YT=RR | 5.1540 | 0.0180 | +234bps | +1bps |
PL5YT=RR | 5-year | PL5YT=RR | 5.5810 | -0.0020 | +313bps | -1bps |
PL10YT=RR | 10-year | PL10YT=RR | 5.7660 | 0.0090 | +331bps | +0bps |
FORWARD RATE AGREEMENTS | ||||||
3x6 | 6x9 | 9x12 | 3M interbank | |||
Czech Rep | CZKFRAPRIBOR= | 4.39 | 4.13 | 3.92 | 4.97 | |
Hungary | HUFFRABUBOR= | 7.14 | 6.88 | 6.61 | 6.89 | |
Poland | PLNFRAWIBOR= | 5.79 | 5.65 | 5.34 | 5.85 | |
Note: FRA quotes | are for ask prices | |||||
************************************************************** | ||||||
Reporting by Alan Charlish and Anna Wlodarczak-Semczuk in Warsaw; Boldizsar Gyori in Budapest and Jason Hovet in Prague, editing by Emelia Sithole-Matarise
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