Panic on the lyre, forint sale

It was hot in the currency market. Only today we have a panic sell-off of the Turkish lira, the Hungarian forint is record weak and the Polish zloty continues to weaken under the pressure of supply. This is certainly not the end of emotions for these and many other couples. The end of the year promises to be really interesting.

Panic sale Turkish lyrewhich in relation to the euro and the dollar today it was cheaper by almost 17 percent. (for comparison, it is as if the dollar went up by 70 cents in one day), this is the reaction to statement by Turkish President Tayyip Erdoganwho is in favor of further cuts interest rates and defends the new strategy of the local central bank, which is fighting against 20% inflation… interest rate cuts. This is dangerous not only for the Turkish economy, but also for the entire region, because the powerful economic crisis that Erdogan is funding Turkey may spill over to other countries. It is more than likely that this topic will not be over by the end of the year. 

USD / TRY chart, period 2016-2021, interval W1. Source: Tickmill

The forint is also weakening

Investors are also getting rid of the Hungarian forint. Today it is the weakest in history. High inflation, an increase in fiscal spending and a twisted money tap from Brussels are the main risks for the forint. Markets assume that Central Bank of Hungary he will have no choice but to raise interest rates sharply. The weakening forint is another reason in favor of this. The forint may be hot until the April elections in Hungary.

What does the zloty do in this statement? Although the situation of the Polish economy is incomparably better than the two mentioned, there are also arguments in favor of the zloty discounting. Low interest rates and delayed reaction of the MPC to soaring inflation in Poland, deteriorating balance of payments, conflict between Warsaw and Brussels, but also the general deterioration of sentiment towards emerging markets are detrimental to the zloty. And this despite the fact that the data from the Polish economy, such as those published this morning, are still very good. The zloty will be hot at least until the end of the year, and it is possible that also in the first quarter of 2022. Only the drop in inflation in Poland expected after the New Year may slightly reduce the pressure on the zloty.