Reuters Zloty edges higher as rate hike expectations grow

EURPLN +0.03% EURCZK −0.03% EURHUF +0.43% EURRON +0.05% The zloty firmed slightly on Tuesday, as growing interest rate hike expectations offset weaker investor sentiment, while other Central Eastern European currencies were mixed. Markets remained focused on developments in the Middle East, with oil prices being the key factor, according to analysts. "On the one hand, the Polish currency remains under pressure due to deteriorating investment sentiment. On the other hand, the weakening is counterbalanced by the valuation of an increasingly aggressive monetary policy scenario in Poland," ING Bank Slaski analysts said in a note. Polish central banker Joanna Tyrowicz, who has long been the most hawkish member of Poland's Monetary Policy Council (MPC), was quoted on Tuesday as saying that pricing processes in Poland were not stabilized and interest rates were not at an appropriate level, with inflation rising and growth robust. National Bank of Poland (NBP) Governor Adam Glapinski said on Monday the bank is ready to act against the current oil price-driven inflation shock, but would take its time to assess the outlook. The Polish zloty EURPLN traded 0.1% higher against the euro at 4.24 at 0918 GMT, remaining within its recent range. Markets were pricing in 37 basis points in interest rate hikes within the next six months in Poland. Yields on 10-year bonds were bid at over 6%. ING said that while its economists' baseline was no change for all central banks in Central and Eastern Europe, there was significant divergence within the region. "From a strategic point of view, we see the NBP as the most likely to make an imminent rate hike, while the (Czech) CNB can wait longer given a more favourable inflation profile," they said in a note. "On the other hand, the (Hungarian) NBH could cut rates this year if the FX rally continues and becomes a problem for the economy," ING added. The Czech crown EURCZK was up 0.1% at 24.2910, while the Hungarian forint EURHUF shed 0.1% to 361.01 per euro, but remained the region's best performer so far this year. Czech bank CSOB said the crown is facing low volatility, helped by a widening rate differential with the euro zone as it noted the spread between the Czech and euro zone 1-year interst rate swaps has again widened to over 1%. "This is of course encouraging news for the crown, as is the fact that the conflict in the Middle East is not escalating further and the markets are still dominated by a risk-on sentiment," CSOB said. In Romania, the central bank on Tuesday raised its annual inflation forecast for this year and central bank governor Mugur Isarescu said policymakers were expecting price growth to peak at around 11% in July, driven by higher fuel prices. The Romanian leu EURRON was down 0.2% against the euro at 5.2210. CEE MARKETS SNAPSHOT AT 1118 CET CURRENCIES Latest trade Previous close Daily change Change in 2025 Czech crown EURCZK 24.2910 24.3110 +0.08% -0.51% Hungary forint EURHUF 361.0100 360.5500 -0.13% +6.47% Polish zloty EURPLN 4.2400 4.2460 +0.14% -0.58% Romanian leu EURRON 5.2210 5.2085 -0.24% -2.43% Serbian dinar EURRSD 117.3300 117.4200 +0.08% -0.03% Note: daily change calculated from 1800 CET STOCKS Latest Previous close Daily change Change in 2025 Prague PX 2554.90 2546.3400 +0.34% -4.87% Budapest BUX 132061.62 132046.37 +0.01% +18.94% Warsaw GPW 3617.01 3610.09 +0.19% +13.60% Bucharest BET 30552.77 30412.98 +0.46% +25.02% BONDS Yield (bid) Yield change Spread vs Bund Daily change in spread Czech Rep 2-year (CZ2YT=RR) 4.2480 0.0600 +154bps +7bps Czech Rep 5-year (CZ5YT=RR) 4.6350 0.0100 +179bps +2bps Czech Rep 10-year (CZ10YT=RR) 4.9900 -0.0220 +184bps -2bps Poland 2-year (PL2YT=RR) 4.7390 0.0030 +203bps +2bps Poland 5-year (PL5YT=RR) 5.6040 -0.0530 +276bps -4bps Poland 10-year (PL10YT=RR) 6.0260 -0.0040 +287bps +0bps FORWARD RATE AGREEMENTS 3x6 6x9 9x12 3M interbank Czech Rep (CZKFRA), (PRIBOR=) 3.88 4.33 4.52 3.56 Poland (PLNFRA), (WIBOR=) 4.12 4.56 4.86 3.85