FX Daily: US data does the talking | Article

The GDP number in Poland for the full year 2023 will be released today, which should show us the fourth quarter as well. We expect moderate growth of 0.4% and a further recovery this year, with expected growth of 3.0%. Otherwise, the calendar in the CEE region does not have much to offer. However, there are still a few stories around in the region this week.

In Poland, we are still waiting for the president to sign the government's new budget proposal for this year. Yesterday, the prime minister raised the topic of early elections if the president blocks the budget. However, we see this more as political rhetoric rather than a real possibility at the moment. In the Czech Republic, we are two days away from the start of the blackout period ahead of next week's Czech National Bank (CNB) meeting. We have already heard some statements from the board with more to come today or tomorrow. However, for now, it seems that the CNB will stay on the cautious side and cut rates again by only 25bp. In Hungary, the EU budget negotiations continue ahead of the EU summit tomorrow. Yesterday we saw some headlines regarding the search for a deal but for now, we are not there. Although the situation is quite unclear, we expect a deal to be reached before the EU summit.

The FX market rallied strongly across the board yesterday driven by the HUF and the National Bank of Hungary's rate decision. However, the market seems to have reversed some losses from previous days and flipped positioning. As we do not see any improvement in fundamentals behind this, we do not expect the rally to continue at the pace we saw yesterday, especially in the CZK market. PLN, on the other hand, still has room to go lower towards 4.340 EUR/PLN as we discussed earlier. Higher market rates or at least an improving interest rate differential here versus the EUR market, in our view, leave room for a stronger zloty, unless political headlines turn negative.

Frantisek Taborsky