Central Europe's leading currencies should firm against the euro over the coming year, according to a Reuters poll, as a steady rate outlook in the region contrasts with monetary easing in the euro zone and the United States. Central European ratesetters are adopting a wait-and-see approach, as moves towards lower borrowing costs in major economies take pressure off them to tighten monetary conditions in the face of inflationary pressures. The region's economies are expected to grow strongly this year and next.

"Global monetary policy conditions are likely to remain highly accommodative," said Marcin Sulewski, an economist at Santander Bank Polska. The poll of 27 analysts predicted the Czech crown would rise 1.88% against the euro, the Polish zloty 2.15% and the Hungarian forint 1.46%. In Poland, central bank governor Adam Glapinski has said rates are likely to stay on hold until 2022. Faced with an increase in inflation, some rate-setters still see a hike as justified, but they are in a minority.

"We think that some hawkish signals from the Polish central bank could intensify in the months to come ... this will be a supportive factor for the zloty," said Sulewski. The Czech central bank has signalled rates will stay unchanged in coming quarters but will also closely monitoring the exchange rate as the crown has underperformed its assumptions in the past. "We believe the (crown) ...is now affected mainly by the negative sentiment in the world economy and it's much weaker than it should be if we consider only the fundamentals of the Czech economy," said Jiri Polansky, an economist at Ceska Sporitelna.

Copyright Reuters, 2019