Forex - Emerging Europe Closing Summary and Highlights 11 July

 15:23 (GMT) 11 Jul

  [Forex Highlights]

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Emerging Europe Closing Summary and Highlights 11 July (0101-MTPR-C01)

POLAND - The zloty appreciated to 4.2642 on the Powell effect, after having touched 4.2754 on Wednesday. Meanwhile, Bloomberg reported that ex Prime Minister Jaroslaw Kaczynski would run the government again if the ruling Law and Justice party wins the Parliamentary elections in the fall by a significant margin, which suggests a further drift towards anti-EU rhetoric but the market ignored the report.

RUSSIA - The ruble has appreciated to USD/RUB 62.8776 with the help from a dovish Fed. Meanwhile, the ruble was also supported in early trading by the fact that Brent crude futures rose to USD 67.24/bbl, as U.S. oil producers cut nearly a third of Gulf of Mexico crude output ahead of a storm, while five Iranian boats neared a British oil tanker on Wednesday and asked it to stop in Iranian waters close by.

SOUTH AFRICA - The rand appreciated significantly, going through the 14 handle, and reaching USD/ZAR 13.8576, after a dovish Fed. The -1.5% y/y contraction in mining output from a revised -1.2% y/y in April was well received by the markets, as it was better than the -2.5% y/y consensus; the 1% y/y growth in May manufacturing output, although decelerating from a revised 4.3% y/y in April, was not weak enough to cause a sell-off. They both confirm the outlook for a July rate cut though.

TURKEY - The lira depreciated to USD/TRY 5.6914 in early trading, as Wednesday's post Powell testimony euphoria lost its legs. Finally, the EU deciding to cut pre-accession assistance to Turkey in 2020 and asking the European Investment Bank to review lending to Turkey may have caused market concern. However, we do not expect economy-wide sanctions, rather there will be sanctions on people linked to Turkish drilling in Cyprus. Europe needs Turkey to cooperate on migration, NATO and countering terrorism hence there is limited scope for widespread sanctions.

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