CEE Currencies React to US Inflation: PLN Benefits, CZK Faces Pressure

CEE: Good news for PLN, not that much for CZK

Yesterday's US inflation numbers moved the central and eastern European currencies as well as the entire emerging market space. Obviously, a higher EUR/USD is good news for the region, but it seems the move was too much, and we may see some corrections today. Poland's zloty benefited the most from the move yesterday, briefly touching 4.40 EUR/PLN, the lowest since July. Core rates moved PLN rates down too but we would expect some rebound here given the tone of the National Bank of Poland. Therefore, we expect the smallest correction in the region and EUR/PLN should hold in the 4.40-4.42 range.

On the other hand, in the Czech Republic, the market does not seem so mispriced as far as monetary policy is concerned and unlike Poland, yesterday's trading already showed a weaker interest rate differential, negative for the koruna. Thus, we think we will see EUR/CZK above 24.500.