Central and Eastern Europe

Central and Eastern Europe

CEE currencies

EUR/HUF (light blue):

  1. The currencies of both the Czech Republic and Hungary often show inverse correlation with the US dollar. The strong performance of the USD since April/May leads to a weakening of the krona and forint.
  2. Markets doubts economic sustainability of Turkey and massively sell the Turkish lira. Hungarian forint (and Czech koruna) suffers collateral damage.
  3. Despite strong economic data, Hungarian forint slips because of pressure on emerging countries (Turkey, Russia, etc.).
  4. The European Union activates the sanctions procedure (the infamous Article 7) against Hungary, which may ultimately end in the deprivation of voting rights. The effective implementation is highly uncertain because every EU member has a veto. The forint hardly reacts.
  5. During a speech, the vice governor of Hungary’s central bank Marton Nagy flags the start of monetary tightening by the central bank. The central bank kept that option on the table when it held its policy meeting just a few days later, further supporting the recent foriny rally.
  6. The forint rallies as markets expect the central bank to start policy normalisation. The central bank indeed raised interest rates in March but said it would be a one-off rather than the start of a hiking cycle. She went even further and announced more monetary stimulus. The Hungarian forint lost all earlier gains

EUR/CZK (dark blue):

  1. The currencies of both the Czech Republic and Hungary often show inverse correlation with the US dollar. The strong performance of the USD since April/May leads to a weakening of the krona and forint.
  2. ‘Buy the rumor, sell the news': In September, the Czech koruna strongly anticipated more central bank interest rate hikes. The central bank put its money where its mouth is, but the krona no longer benefited from it.
  3. Despite multiple rate hikes, the Czech koruna remains under pressure as growth slowed down more than anticipated. Political uncertainty (vote of no confidence) keeps the currency in the defensive also. Meanwhile, prime minister Andres Babis’ government survived the vote.
  4. The Czech koruna’s rally amid a constructive risk climate and on prospects of a new rate hike in February by the Czech National Bank, stalls. The recently sworn in CNB governor Holub casts doubt on a February hike after world leading central banks (a.o. the ECB) staged a dovish turn just recently.
  5. The Czech koruna strenghtens following better than expected growth (1.0% QoQ) in the fourth quarter of 2018, bolstering the case for more rate hikes from the Czech national bank.
  6. The Czech koruna slips after a poor print of business confidence in Germany, a crucial trade partner of the Czech Republic. The currency recovered soon after before losing ground again in May as a broad risk-off wave flushes markets.

Forecasts for the Central and Eastern European countries in numbers:

In-depth credit reviews

In depth review: Slovakia

MR20181218 In depth review: Slovakia

Most recent publications on Central and Eastern Europe:

Hard Brexit will make Central European economies bleed

EO20190328 Hard Brexit will make Central European economies bleed

EU funding for Central and Eastern European regions remains essential

EU-fondsen voor Centraal- en Oost-Europese regio’s blijven noodzakelijk

Diversity in European income trends...but education pays off everywhere

Geen eenheid maar diversiteit in Europese inkomenstrends
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