CEE FX: JP Morgan Remain Long EURCZK, Stay Clear of PLN

JP Morgan note that positioning, valuations and trading patterns argue for some differentiation in CE3 FX. They conclude that CZK remains the best candidate to remain positioned for lower inflation/faster easing cycle while HUF is the best candidate for a potential cyclical uplift. In PLN, they believe it is worth staying on the sidelines for now.

• JPM recommend 2-month 1x1 389/381 EURHUF put spreads (spot ref. 391.33). They had recommended short USDHUF in early April only to be stopped out on April’s US CPI, but continue to see HUF as best placed for gains in the region. They add that HUF currently has the strongest BoP dynamic in the region with a notable improvement in FDI momentum.
• JP Morgan remain long EURCZK (target 25.6; entry ref. 25.048). They believe EURCZK will remain more closely related with CNB’s rate path, with the next decision highly dependent on the May CPI print. They also believe both FX and rates are now under-pricing the chances of a faster CNB cutting cycle.
• Meanwhile, JPM recommend steering clear of PLN, with a MW view and no outright trades. Besides extended long positioning, they also see PLN as fairly expensive in their short term valuation model vs. local equity prices and front-end rate spreads.