UK referendum outcome sent shock-waves across all markets including Central Europe. The reaction was quite pronounced in both equity and forex markets. The zloty and forint weakened by 2% and 1% respectively. As for the Czech koruna, despite a restrained response has weakened 0.2% against the euro and the EUR/CZK hit 9-months high on Friday afternoon.
Market reaction was asymmetric in the regional fixed-income markets. Czech government bond yields moved lower (though not as aggressively as did Bund yields), Hungarian and Polish bond yields jumped up by some 25 basis points.
Although volatility in core and regional markets has declined, volatility is unlikely to fade away. Risk aversion is likely to continue as there is a lot of uncertainty on the tactics that both the UK and the EU follow to manage the post-Brexit cooperation. In this environment all CE currencies (including the Czech koruna) might stay under pressure.
“Should the zloty extend its losses (the EUR/PLN is traded above 4.50) the market has to be ready for eventual forex interventions from the Polish authorities,” notes KBC Bank in a report.
The material has been provided by InstaForex Company – www.instaforex.com