PLN, HUF and CZK have all been struggling in June, leaving the zloty and the forint at the yellow risk level, notes the analysis team at Nordea Markets.
Key Quotes
“Worsening EM sentiment has been the overall driver, but (too) dovish central banks has also been an important factor. Thus, the Polish and especially the Hungarian central banks remain among the most defensive central banks in Europe due to a stubbornly low inflation.”
“However, the recent sell-off pressure on the HUF means that the MNB will probably not continue its passive stance throughout 2018 as the FX pass-through materializes. Although a rate hike cannot be completely ruled out as MNB governor Matolcsy has struck a more hawkish tone lately, removing its easing bias would be the first step.”
“Furthermore, the central bank will most likely prefer to end its unorthodox program MIRS before using the interest rate tool box. Consequently, we think the MNB will be on hold in 2018.”
“We expect the Polish central bank to be on hold until Q4 2019 as the MPC council members continues their dovish rhetoric despite the recent sell-off. With the Euro area losing growth momentum and the political risks increasing, we expect more headwinds for the PLN short-term.”
“Contrary to the MNB and the NBP, the CNB recently hiked its 2-week repo rate by 25 bp. We expect more could be on the cards already in August because the rate hike has not kept the CZK from bleeding, and the markets will likely keep testing the central bank. With the central bank’s latest hawkish statement in mind, we see the risk tilted towards two rate hikes in 2018.”
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