FX Daily: Data giving no respite to the dollar | articles

Yesterday’s core inflation data for Poland showed a notable decrease in February, as reflected in Friday’s headline figures and a revision of CPI weights. Core inflation dropped from 4% in December to 3.7% in January, and 3.6% in February. However, an interview with a National Bank of Poland representative indicated that the central bank’s view hasn’t changed too much. On the other hand, our economists believe these changes will bring inflation to the central bank’s target perhaps as early as the end of this year vs. 2027 in the NBP’s forecast.

In the Czech Republic, yesterday’s PPI numbers showed the first year-on-year decline since last February, but in the details we can see continued growth in other segments of the economy. In particular, agricultural producer prices at 9.3% YoY are in the central bank’s sights. The Czech National Bank blackout period starts tomorrow and surprisingly we didn’t see any interviews yesterday. So we should probably see most of the central bank’s communication today ahead of next week’s meeting when we expect the central bank to leave rates unchanged at 3.75%.

The CEE market on Monday produced a mixed picture. Although a rally in the rates space driven mainly by core rates should keep CEE FX rather at weaker levels, higher EUR/USD and further gains in European equity markets should indicate stronger CEE FX. As a result, the Polish zloty and Czech koruna weakened only slightly, while the Hungarian forint tested the strongest levels since last October with EUR/HUF 398. As we discussed in yesterday’s outlook for this week, we believe that given the dovish PLN story, dull CZK trading and global direction HUF may outperform CEE peers this week.

Today, the focus will be on the Trump-Putin phone call and potential progress in negotiations and the peace deal, which should be positive for the entire CEE region, led by HUF. EUR/HUF could thus continue to test new lows below 398.

Frantisek Taborsky