CEE MARKETS-Czech crown weakens on expectations of smaller rate cut
27/06/2024 09:40
By Boldizsar Gyori
BUDAPEST, June 27 (Reuters) - The Czech crown weakened
ahead of a rate decision by policymakers on Thursday, with the
forint and zloty slightly firming in range-bound trading.
The Czech National Bank is likely to slow its interest
rate-cutting drive when it convenes later in the day, with
markets betting the central bank will opt for a smaller cut
following three straight 50-basis-point reductions.
The decision is scheduled for 2:30 p.m. (1230 GMT), with the
governor delivering his comments at 3:45 p.m.
The majority of respondents expect the pace of rate cuts to
slow to 25 bps, a Reuters poll showed, to a policy rate
CZCBIR=ECI of 5%, forecasting the repo rate at 4% by the end
of the year.
The crown EURCZK= weakened by 0.19% to 24.945 to the euro
at 0802 GMT, hovering around the six-week low it touched briefly
late last week.
"In our view, the weaker koruna exchange rate since mid-June
now acts as the swing factor in favour of a smaller cut,"
Commerzbank wrote in a note.
"There were several remarks and signals ... which suggested
that both 25bp and 50bp rate cut options will be at play during
the meeting, but on balance, the 25bp outcome has emerged as the
favourite."
Czech inflation has fallen below 3% and is in the bank's
tolerance band around its 2% target, after hitting double-digit
rates in 2022-2023.
But double-digit wage rises outpacing average growth rates
in the European Union have raised alarm among central Europe's
monetary policymakers wary of a rebound in inflation as the
region's economic recovery gains traction.
"Slowing core inflation speaks in favour of a more rapid
cut. However ... a high and stable rate of growth in prices of
services, is an argument for greater caution. Above-average wage
growth is another inflationary risk," J&T Bank said.
Elsewhere in the region the Polish zloty EURPLN= traded at
4.31, firming 0.1%, but remaining in a range.
"We assume EURPLN will remain in the 4.25-4.35 range in the
coming weeks, and we think the zloty may stay closer to the
weaker end of this range in case of prolonged dollar strength
and uncertainty around the French elections," Santander Bank
Polska said in a note.
The forint EURHUF= traded at 396, up by 0.15%.
CEE SNAPSHO AT
MARKETS T 1002 CET
CURRENC
IES
Latest Previous Daily Change
trade close chang in 2024
e
EURCZK= Czech %
EURHUF= Hungary 0 5%
EURPLN= Polish 0%
EURRON= Romania 0%
EURRSD= Serbian 0 2%
Note: calculated from 1800
daily CET
change
Latest Previous Daily Change
close chang in 2024
e
.PX Prague .PX 1530.37 1539.910 -0.62 +8.23%
0 %
.BUX Budapes .BUX 71146.4 71013.43 +0.1 +17.36
t 8 9% %
.WIG20 Warsaw .WIG20 2543.31 2541.43 +0.0 +8.55%
7%
.BETI Buchare .BETI 18023.7 18279.10 -1.40 +17.26
st 0 % %
Sprea Daily
d
vs change
Bund in
Czech spread
Republi
c
CZ2YT=RR bps
CZ5YT=RR bps
CZ10YT=R bps
Poland
PL2YT=RR bps
PL5YT=RR bps
PL10YT=R bps
FORWARD RATE
AGREEMENTS
3x6 6x9 9x12 3M
interba
nk
Czech CZKFRA 4.49 4.21 4.01 4.98
Rep
Hungary HUFFRA 7.15 6.88 6.62 6.89
BUBOR=
Poland PLNFRA 5.78 5.61 5.31 5.85
WIBOR=
Note: are for ask
FRA prices
quotes
*******************************************
*******************
(Reporting by Boldizsar Gyori in Budapest; additional reporting
by Badohal Karol in Warsaw and Jan Lopatka in Prague; Editing by
Anil D'Silva)
((boldizsar.gyori@thomsonreuters.com;))
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