PRAGUE, July 8 (Reuters) - Poland's zloty hit a 19-month low on Wednesday as a breakdown in Middle East peace increased risk aversion ahead of an interest rate decision.
Analysts widely expect the Polish central bank to hold rates with new inflation forecasts likely to rise to include the impact of the war between U.S. and Iran that began on February 28.
On Wednesday, U.S. President Donald Trump said the memorandum of understanding signed with Iran to end their nearly four-month conflict in June was "over". Central Europe's main stock indices lost between 1.5% and 2% on the day.
Earlier, Iran's Revolutionary Guards said they targeted U.S. military sites in Bahrain and Kuwait after the United States launched a wave of military strikes on Iran in response to attacks on tankers in the Strait of Hormuz.
INFLATION SLOWER FOR NOW
Inflation in central Europe has been slowing since it was clear that the two warring countries were looking to halt hostilities that had caused oil prices to surge and hurt the global economic outlook.
Polish bank PKO BP, in a morning note before Trump spoke about Iran, said Poland's central bank may soften its rhetoric due to inflation developments, which could push bond yields lower and the zloty weaker. A Reuters poll this week saw the Polish main rate on hold at 3.75% for the rest of the year.
"The more interesting question is what language the MPC (monetary policy committee) will use around future moves, now that recent inflation data have comprehensively stripped away the rate-hike narrative," Commerzbank said.
The zloty had eased 0.4% to 4.3135 by 0924 GMT, off a session low of 4.3174, which was the lowest in 19 months.
The forint was at its weakest since late May, down over 1% on the day at 358.900 to the euro, while the Czech crown fell 0.2% to 24.281 per euro.
In Romania, the leu dipped less than 0.1% to 5.2350 per euro ahead of the country's own policy decision.
With inflation above 10%, Romania's central bank is expected to continue to keep its already high main rate at 6.50% on Wednesday and throughout 2026, according to analysts in a Reuters poll.
CEE MARKETS SNAPSHOT AT 1124
CET
CURRENCIES Latest Previou Daily Change
trade s close change in 2026
Czech 24.281 24.2330 -0.20% -0.47%
crown 0
Hungary 358.90 354.750 -1.16% +7.10%
forint 00 0
Polish 4.3135 4.2980 -0.36% -2.27%
zloty
Romania 5.2350 5.2330 -0.04% -2.69%
n leu
Serbian 117.27 117.340 +0.06 +0.03%
dinar 00 0 %
Note: daily change calculated from 1800
CET
BONDS Yield Yield Spread Daily
(bid) change vs change
Bund in
spread
Czech 3.9209 0.0624 +125b -3bps
Rep ps
2-year
Czech 4.1483 0.0850 +136b +0bps
Rep ps
5-year
Czech 4.6856 0.1097 +162b +3bps
Rep ps
10-year
Poland 4.1960 -0.0200 +152b -11bps
2-year ps
Poland 4.8830 0.0530 +210b -3bps
5-year ps
Poland 5.4640 0.1070 +240b +3bps
10-year ps
FORWARD RATE 3x6 6x9 9x12 3M
AGREEMENTS interba
nk
Czech 4.01 4.01 4.04 3.81
Rep
Poland 3.83 3.84 3.86 3.82
Note: FRA quotes are for
ask prices
(Reporting by Jason Hovet in Prague, Anita Komuves in Budapest and Karol Badohal in Warsaw; Editing by Harikrishnan Nair)
