A Look At The EMEA Nations

We believe the weak Polish economy will trigger further rate cuts near term and this is likely to put some depreciation pressure on the zloty. Thus, we expect some zloty weakness to return in coming months, as we believe macroeconomic data and low inflation will convince the markets and the NBP that further rate cuts are needed.

HUF: Policy Uncertainties, But Much Is Already Priced In
The Hungarian forint has rebounded somewhat recently. This mostly reflects an improvement in the global financial environment. Political uncertainties remain a worry but Hungary's political and structural problems are well known by market participants and so should be more or less fully priced in.

CZK: Czech Koruna Suffers From Dismal Economy
The Czech koruna lost quite a bit this week on the dismal Q1 GDP released this week. The preliminary release showed that the recession deepened further in Q1, despite a general expectation that the economy had bottomed out. Our EUR/CZK forecast does not reflect any action by the CNB but rather the weakness in the economy. Our forecast is EUR/CZK 26.10, 26.20 and 26.0 in three, six and 12 months.

TRY: Turkey's Dovish Central Bank To Depress The Lira
The Turkish lira lost on unexpectedly aggressive monetary easing by the Turkish central bank (TCMB) after it slashed the key policy rate by 50bp twice in a row, bringing the key policy rate to 4.50%. We remain fairly bearish on TRY on all forecast horizons as short term, the TRY will be influenced by a continued dovish central bank and fairly weak economy while the large current account deficit will push the USD/TRY up on a 12M horizon

ZAR: Regime Uncertainty Weighs On ZAR
The ongoing renewed sell-off in ZAR comes on the back of another strike in the mining sector announced this week. Even though ZAR has rebounded over the past couple of weeks on the back of fairly positive sentiment towards risky assets, it lost very quickly on the back of negative domestic news. We have not changed our stance on ZAR and remain bearish on all forecast horizons.

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