Commerzbank note, the forint underperformed...>

FOREX: Commerzbank note, the forint underperformed the zloty since April as the

Hungarian central bank held on to an ultra-dovish monetary stance. This month,

the PLN-HUF cross has risen further as Polish inflation accelerated while

Hungarian inflation softened.

Yesterday's publication of the core Polish inflation rate at 1.9%y/y for June

extended the zloty's rally relative to the forint. Thee PLN-HUF cross ended the

session noticeably stronger. Until a month ago, Hungarian inflation had strong

momentum while Polish inflation was soft. But, this reversed over the past

month: inflation surprises reversed - Hungarian core inflation indicators fell

notably in June, even while Polish inflation surged past its 2.5% target. 

We still think that Polish inflation will ultimately moderate to below target by

next year, in line with trends we are seeing in the euro zone. But at least for

now, the data are giving muscle power to the MPC hawks, one of whom remarked

yesterday that a rate hike proposal could be tabled at one of the forthcoming

meetings. This is a big change from a scenario where NBP was expected to leave

rates unchanged through 2022.