Zloty retreats as ECB rate cut could put pressure on hawkish NBP

WARSAW, Dec 12 (Reuters) – The zloty fell further from a 2-1/2-month high on Thursday, with analysts saying further interest rate cuts by the European Central Bank (ECB) could undermine Poland’s central bank’s recent hawkishness. The European Central Bank is almost certain to cut interest rates by 25 basis points later in the day and signal further easing next year as inflation across the euro zone falls back to near target and the economy falters. The zloty was down 0.3% at 4.2810 by 0951 GMT, having hit its highest level since late September at 4.2550 on Monday, following comments last week from Poland’s central bank governor Adam Glapinski delaying the prospect of rate cuts beyond 2025, citing inflation risks. Analysts at Santander Poland wrote in a note: “EURPLN is approaching 4.27 this morning and we believe EUR/EUR could rise further to 4.30, in response to the expected dovish tone of the ECB for the day. ” “If the ECB decides to cut interest rates by 50 basis points today and/or issue a very dovish statement, investors may once again question whether the NBP Governor’s hawkish message… regarding postponing rate cut discussions until next October Still, some Polish policymakers say rate cuts could begin earlier, possibly after March, when the outlook for inflation becomes clearer. Investors are already expecting about 125 basis points of policy easing over the next 12 months. Grabinski’s deputy told Reuters that U.S. tariffs could support early easing if the tariffs prove to be able to curb inflation. Standard & Poor’s said Central Europe’s sovereign ratings may be tested by new U.S. policies. The Hungarian forint edged down 0.1% to 410.0500 per euro, but still held on to most of its gains since falling to a two-year low of 415.35 last week. “The forint has been severely underperforming against most currencies for several months and investors don’t seem to want to retain such large positions at the end of the year,” said a trader in Budapest, which said last week’s surprise upgrade by Fitch The rating outlook was revised on the grounds that macroeconomic imbalances have eased, boosting the confidence of some investors. “The forint also broke through some important technical barriers, with a very important support level around 412-412.50, with a lot of trading happening after the currency strengthened,” the trader added. The Czech crown was steady at 25.0650, just below its highest level since late September. Central and Eastern Europe Market Snapshot 1051 Latest daily changes in Central and European currencies Trading closing price changes in 2024 Czech Republic 25.0650 25.0750 0.04% -1.45% Hungarian Crown 410.0500 409.7900 -0.06% -6.55% Polish Forint 4.2810 4.2687 -0.29% 1.48% PLN Romanian 4.9699 4.9672 -0.05% 0.09% Leu Serbian 116.9300 116.9800 0.04% 0.27% Dinar Note: Latest previous day change calculated based on 1800 CET daily change 2024 closing change Prague 1735.62 1722.320 0.77% 22.74% 0 Budapest 80469.64 80530.65 -0.08% 32.74% Warsaw 2278.04 2296.10 -0.79% -2.77% Bucharest 17358.43 17394.91 -0.21% Czech Republic 2 The daily interest rate difference between 1-year government bonds and foreign debt interest rate changes by 12.93%

5 years

10-year term

Polish 2-year program 5 years 10-year term FORWARD 3×6 6×9 9×12 3M Interban k Czech Republic < 3.86 3.71 3.56 3.90 PRIBOR=> Hungary < 6.93 6.58 6.26 6.50 BUBOR=> Poland < 5.71 5.33 4.97 5.85 WIBOR=> Note: FRA is the asking price quote************************************************ ********** ************ (Reporting by Karol Badohal in Warsaw and Anita Komuves in Budapest ;Editing by Kirsten Donovan)