Forex Stronger Despite Declining Growth Pace – ING

Yesterday’s PMI figures showed slight signs of improvement in industrial sentiment for August in most countries, but overall remains well below the 50p mark. At the same time, Turkey’s second-quarter GDP delivered a negative surprise that points to weakening momentum, notes Frantisek Taborsky, ING’s currency strategist.

Markets are back in full swing after the US holiday

“This morning the second quarter GDP breakdown from Hungary was released and later today we will see the second quarter wages from the Czech Republic, which we see up 4.2% from last year in terms of reals, slightly below market expectations, while the Czech National Bank (CNB) expects 4.6%. This could be the first time in some time that a data print will attract the attention of the CNB and could bring some volatility to the stable summer market levels.”

“Also today in Turkey, we expect inflation to ease again from 61.8% to 51.8% YoY, which is also the market consensus, mainly due to the base effect and weaker price growth in food. After the US holiday, markets are back in full swing and we maintain our CEE FX bias from yesterday.”

“PLN posted the biggest gains in the region after continued repricing in the rates space ahead of Wednesday’s National Bank of Poland meeting. We think there is more to come here, plus EUR/USD has shown some reversal limiting the negative impact of the previous days. Therefore, we remain bullish on PLN, but also on CZK below EUR/CZK 25.00.”