EUR/HUF seen to gradually rise over the coming quarters, says Commerzbank

The Polish zloty and the Hungarian forint went their separate ways yesterday; the zloty continued to weaken against the euro even while the forint strengthened. The Polish side of the equation is quite clear: both monetary policy and political developments are zloty negative. Today, the NBP will publish the MPC minutes.

They will likely establish that hawks have no critical mass at the moment. As long as Governor Adam Glapinski himself is not supporting a rate hike, such a step is unlikely. On the politics front, the EC replied to the government re-asserting, with clarifications, that its recommendations (concerning rule of law) of 26 July are, indeed, legally valid.

The deadline for Poland to respond is next Saturday, which means that we could return next week to renewed discussion of Article 7 being triggered. No wonder EUR/PLN is under upward pressure. Inflation has recently accelerated.

Still, it is interesting that the market no longer pays much attention to the Hungarian central bank saying that inflation risks are to the downside and that it will continue unconventional monetary easing. These remarks are not weakening HUF any longer.

"Hungary is probably benefitting from additional portfolio inflow simply because investors view Poland as too risky. But fundamentally, we would expect EUR-HUF to gradually rise over the coming quarters," Commerzbank commented in its latest research report.

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