CEE MARKETS-Currencies under pressure as US tariff deadline approaches
26/03/2025 09:41
By Anna Wlodarczak-Semczuk WARSAW, March 26 (Reuters) - Central European currencies were mostly weaker on Wednesday despite hawkish signals from the region's central banks, as investors are wary of potential U.S tariffs expected to come into force next month. "We expect tactical EEMEA FX weakness into the April 2 tariff deadline, but thereafter renewed strength in Q2. Growth globally is damaged by uncertainty, but we think EEMEA FX should perform well," Bank of America said in a note. "The major risk is some liquidity event, including from a greater-than-expected tariff announcement." Markets await a Czech central bank decision on interest rates later in the day, with analysts expecting them to remain steady amid inflation pressures and rising global uncertainty from trade wars sparked by U.S. tariffs. "The crown is on a positive wave and holding its position below 25 per euro. Today's stable rates and lightly hawkish message should be to its liking," Czech bank CSOB said. "On the other hand, it will be interesting to see whether it holds this position until the end of the month with the approaching American 'tariff action' against the EU." Markets price in a further cut to the main rate, which sits at 3.75% CZCBIR=ECI, at the bank's following meeting in May, when new economic forecasts will be ready. The Czech crown EURCZK= was down 0.1% at 24.9300 per euro at 0902 GMT. The Hungarian central bank held interest rates steady on Tuesday and recently appointed Governor Mihaly Varga upheld his predecessor's hawkish communication. The latest inflation readings for Hungary prompted analysts to erase nearly all bets on rate easing by the NBH this year, projecting just 25 basis points of rate cuts by the end of 2025 in a Reuters' poll conducted before the decision. "We maintain our forecast for the NBH to ease monetary conditions in 4Q25 by a cumulative 75bp and to follow through with another 75bp in 1Q26 as we see inflation falling to the 3%Y target in that quarter," Morgan Stanley said in a note. "That said, we consider now risks to our rates forecast as skewed to the upside. A resumption in FX depreciation pressures could prevent inflation from falling as quickly as we expect back to the tolerance band." The forint EURHUF= was 0.3% weaker at 400.50 per euro while the Polish zloty EURPLN= lost 0.1% to trade at 4.1705. Bank of America analyst said that a weaker dollar and a hawkish National Bank of Poland (NBP) should strengthen the zloty, albeit overvaluation should constrain the pace of appreciation. Central European stock markets were mixed, with Prague .PX and Budapest .BUX gaining slightly but Warsaw .WIG20 losing 1.4% as shares of CD Projekt CDR.WA fell nearly 13% after Poland's biggest game developer said the premiere of "Witcher IV" was scheduled for after 2026.
| CEE MARKETS SNAPSHOT AT 1002 CET | |||||
| CURRENCIES | Latest trade | Previous close | Daily change | Change in 2025 | |
| Czech crown | EURCZK= | 24.9300 | 24.9050 | -0.10% | +1.12% |
| Hungary forint | EURHUF= | 400.5000 | 399.3500 | -0.29% | +2.73% |
| Polish zloty | EURPLN= | 4.1705 | 4.1645 | -0.14% | +2.55% |
| Romanian leu | EURRON= | 4.9757 | 4.9755 | -0.00% | +0.02% |
| Serbian dinar | EURRSD= | 117.1100 | 117.2300 | +0.10% | -0.14% |
| Note: daily change calculated from 1800 CET | |||||
| STOCKS | Latest | Previous close | Daily change | Change in 2025 | |
| Prague | .PX | 2125.82 | 2116.2000 | +0.45% | +20.77% |
| Budapest | .BUX | 91944.70 | 91632.37 | +0.34% | +15.91% |
| Warsaw | .WIG20 | 2760.93 | 2800.29 | -1.41% | +25.95% |
| Bucharest | .BETI | 17434.63 | 17445.55 | -0.06% | +4.27% |
| BONDS | Yield (bid) | Yield change | Spread vs Bund | Daily change in spread | |
| Czech Rep 2-year | CZ2YT=RR | 3.3900 | -0.0070 | +126bps | +0bps |
| Czech Rep 5-year | CZ5YT=RR | 3.8410 | -0.0180 | +143bps | -1bps |
| Czech Rep 10-year | CZ10YT=RR | 4.3460 | 0.0310 | +156bps | +4bps |
| Poland 2-year | PL2YT=RR | 5.1110 | 0.0010 | +298bps | +1bps |
| Poland 5-year | PL5YT=RR | 5.4340 | -0.0710 | +302bps | -6bps |
| Poland 10-year | PL10YT=RR | 5.8050 | -0.0550 | +302bps | -4bps |
| FORWARD RATE AGREEMENTS | 3x6 | 6x9 | 9x12 | 3M interbank | |
| Czech Rep | CZKFRA, PRIBOR= | 3.52 | 3.42 | 3.34 | 3.72 |
| Hungary | HUFFRA, BUBOR= | 7.02 | 6.97 | 6.73 | 6.51 |
| Poland | PLNFRA, WIBOR= | 5.58 | 5.01 | 4.63 | 5.87 |
| Note: FRA quotes are for ask prices | |||||