After a busy few days, Friday should be fairly quiet in the CEE region. On today’s calendar we only have the PPI data for December in Poland, where we expect a new drop from -4.7% to -6.0% year-on-year. However, the currency market still seems to have something to say. EUR/HUF jumped above 382 yesterday for the first time since the beginning of the year and, as we discussed previously, we expect more weakness here going forward. In our view, the rates and currency divergence of the last two weeks, combined with the dovish tone from the NBH and political noise from the European Parliament, will keep the HUF under pressure. We see a stabilization around 384 per no, however, the long-term positioning of the HUF may complicate the situation in the coming days. On the other hand, we believe that the situation would only start to become uncomfortable for NBH above 390 EUR/HUF levels.
The Czech koruna also came under pressure for the first time yesterday, after its peers in the Central and Eastern European region came under pressure this week. Markets again priced in further CNB rate cuts despite cautious comments from central bankers and the interest rate differential narrowed somewhat against the Czech koruna’s favour. However, we do not expect further weakness here and as we indicated earlier this week, 24,700-800 is the range we see EUR/CZK in these days.
On the other hand, PLN gained some support yesterday for the first time in a week and recovered below 4,400 EUR/PLN. The lower house of parliament approved a key budget bill and the president indicated support for it, although he ruled out the possibility of early elections. This may calm things down for a while, but there are still more than enough open issues that we believe will cause political tensions in Poland to further escalate. Therefore, we remain negative on the PLN for the next few days, although we could see some gains today thanks to the latest news.