EMEA Weekly: We remain worried about ZAR and HUF

- Market movers ahead: Will the SARB cut again? "Rate decisions in Hungary and South Africa are the main events to watch next week. In Hungary we expect the Hungarian central bank to stay on hold keeping the key policy rate at 5.25% as the recent sell-off in forint and the increased uncertainty outlook for fiscal policy probably mean that easing cycle has come to an end. South African rate decision will undoubtedly prove interesting to follow as the uncertainty about the outcome is fairly high. While consensus expect the South African central bank (SARB) to stay on hold we see a chance of yet another 50bp rate cut. That would bring the key policy rate to 6.00% in South Africa. For the rate reduction argues recent dovish comments from the SARB governor Gill Marcus, inflation development but also recent data from the economy, which mostly surprised on the downside signalling that economic recovery is losing steam."
- FX Outlook: CZK back on the top spot "Last week our EMEA FX Scorecard overall send relatively bearish signals. The bearish signals are not quite as strong now, but nonetheless the Scorecard is still overall negative and we would therefore overall continue to expect some pressure on the EMEA currencies going forward in next 1-3 months. That said the signal is certainly not a “massive sell” signal and the Scorecard is in fact positive on three out of the seven currencies in the Scorecard – CZK, PLN and TRY. The Czech koruna is now back as the top scorer and CZK also remain the currency with the strong potential for strengthening over the longer term due to attractive valuation. Therefore we feel pretty confident in recommending investors to continue to be long the Czech currency both against its region peers and USD and EUR. This week we updated our FX forecasts. Read more in the July version of the Emerging Markets Briefer."
- Scorecard-based trade of the week Buy CZK/ZAR "Last week we recommended buying RON/ZAR based on our EMEA FX Scorecard. That trade is up a bit over the week. This week the rand is still the lowest scoring currency in the EMEA FX Scorecard, while the Czech koruna now is the highest scoring currency in the Scorecard. We therefore recommend buying CZK/ZAR going into next week."
DenDanske EMEA Weekly 20100716

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