HUF: Moody’s unexpected downgrade hurts our long HUF trade
PLN: NBP will intensify its interventions
TRY: The CBRT has to show it stands behind the lira
CZK: The CZK is not a safe haven. EUR-CZK to break above 26.00
HUF: EUR-HUF is strongly up after Moody’s cut Hungary to Ba1 (negative outlook), i.e. “junk” status. This decision is a rather a surprise as the market was expecting a rating action from S&P’s. In fact, S&P’s has decided to put its rating decision on hold and wait for the results of the negotiations with the IMF. Moody’s has obviously strongly hurt our tactical short EUR-HUF.
PLN: EUR-PLN is now comfortably above 4.50 and there is little doubt that the NBP will strike back. Yesterday the deputy governor Witold Kozinski said that the central bank may intensify its intervention. It means that the NBP is likely to intervene more frequently and in bigger size. So far, the NBP intervened at three occasions but sold only small amounts, particularly during the last intervention this week.
TRY: with USD-TRY on the road to the recent historical highs of 1.90 and the basket trading close to 2.20, the Turkish central bank will have to be more aggressive. The CBRT may change its NO-NO strategy (No repo auction and No FX auction) and combine liquidity squeeze and a big FX auction. The CBRT has to show that it stands behind the lira and keeps a consistent policy.
CZK: As we have emphasised in a recent report, the CZK is not a safe haven. Even though the central bank tries hard to prove to investors that Czech Republic has strong macro and financial fundamentals and provides data to show the absence of dependence on foreign banks financing, the CZK continues to weaken. Our view that EUR-CZK will break above 26.00 is intact.
HSBC Global Research