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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EM FX
- In the past few weeks, we have seen that traders have been chasing CEE currencies as central banks prepare for tightening cycle in order to curb inflationary pressures.
- It was first the CNB who hinted the market of potential 2 to 3 hikes in H2 with the first one priced in as early as August, but then rising disagreements between NBP and NBH policymakers over the ST trajectory of interest rates have also generated strong support for PLN and HUF since the beginning of April.
- The most recent comments were from NBH deputy governor Virag who recently mentioned that Hungary should prepare for rate hikes in the coming months and that the next May CPI pint coming out on June 9 will be key for policy turn (after April CPI surged to 5.1%). Some sell-side firms are already expecting a 10 to 15bps hike this summer.
- However, the probability that CEE central banks will pursue an 'aggressive' tightening cycle is very low, especially as policymakers aim to keep financial conditions as loose as possible following the difficult first quarter.
- The chart below shows that CEE currencies have appreciated by 3 to 4 percent (relative to the USD) in both April and May (up to date) and it seems that most of the 'early hike' news has been priced in now by the market, which could lead to a deceleration of the momentum we have seen in the past two months as traders start to take profit.
- How much upside is left in CEE currencies?
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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