6Likes
LinkBack URL
About LinkBacks
Polish Zloty (EUR/PLN) – low inflation implies another interest rate cut
The EUR/USD rally and improved global sentiment helped emerging market currencies to regain ground they have lost the previous week. In Poland, also closely followed was the inflation reading, which showed historic lows of 0.5% in May (on a yearly basis). Core CPI on the other hand declined to 1% in May. Such low inflation rather confirms the MPC has no time to waste and we should expect another interest rate cut in June. Theses cut has already been discounted by the market and it had not affected the PLN. The sellout of treasuries also halted (the sellout accelerated the previous week) and with decreased risk aversion the Zloty appreciated this past week.*
It has to be noted that the central bank intervened (sold Euros for Zlotys) on the currency market last week in order to “decrease volatility on the Zloty market”. The effect, as usual, was short-term but it helped the EUR/PLN to decline to 4.23 from which level the market rebounded to the resistance of 4.28. Unable to fly higher, the market tumbled to the important support of 4.21. This level is crucial and if broken it can take the EUR/PLN down to 4.17. More probable though (supported by the stochastic oscillator showing the market is oversold) is a rebound next week, first to 4.25 and possibly to the resistance of 4.28
Hungarian Forint (EUR/HUF) – is the economy rebounding?
In the last couple of weeks macro data from Hungary positively surprised traders. First – better than expected GDP reading. Today, industrial production increasing as forecasted but showing even more potential (industrial orders increased by 10% on a yearly basis in April). Are the steps taken by PM Victor Orban more effective than those taken by Brussels in other Eurozone countries? That might be the case as Hungary is showing some signs of recovery. Of course, we need a series of reports confirming the economy is doing better, but still, it all looks promising. Also bullish on the local economy is Mark Mobius, who runs the Templeton Emerging Markets fund (holding large amounts of Hungarian sovereign debt). In a widely commented interview give to the largest finance newspaper in Hungary, Napi Gazdesagi, he stated the outlook looks bright and he does not expect big downturns. The future will show if he was right.*Looking at the chart, we see the EUR/HUF tested the crucial 300 level but was unable to break it. The corrective movement brought it down all the way to 290 (breaking on the way the 295 support). If the market ends this week below 290, it will have the door open to attack 285 next week. On the other hand, any rebound will be targeting the resistance at 295.
Romanian Leu (EUR/RON) – The other side of the argument
Mentioning volatility that would help the RON in the last report was just a general , still, while 4.60 was a step away, things looked overextended for EUR/RON. It was time for the National Bank to step in, and although there is no official comment on intervention, one may suppose that it actually happened. There were some good data points as well, as trade deficit shrank by about 323 mil. EUR in April (one third lower than in 2012) and industrial production rose by 1.9% m/m. CPI rose 5.23%, possibly delaying, in the overall volatile market environment, the start of rate cuts cycle. However, if this week was RON-powered, things may again sustain the Euro, given the jitters over the IMF visit that may bring a cease of a standby agreement.*Technical analysis showed a reversal for EUR/RON moving quotes to the lowest support we mentioned in the last report. 4.45 is definitely the most important level to watch, and a break below would signal piercing the 50% retracement and open room for a test of the 61.8% retracement at 4.4189 in a scenario that appears interesting. However a positive correction may let prices test resistances, and that brings us to 4.5479 and 4.5806, previous level of resistance and recent high respectively.
More...
Reply With Quote
Bookmarks