Poland's zloty pulls back from 19-month low after interest rates unchanged

PRAGUE, July 8 (Reuters) - Poland's zloty cut some losses on Wednesday as its central bank kept interest rates steady as expected, after a breakdown in Middle East peace prospects triggered risk aversion that pushed the currency to a 19-month low earlier in the day.

The National Bank of Poland left its main interest rate at 3.75% on Wednesday, remaining cautious despite inflation slowing in June, as the bank's new inflation forecasts showed faster than previously expected price growth this year and next.

The previous NBP projection released in early March did not account for the impact of war in the Middle East.

According to mBank analysts, the central bank's new forecast still showed inflation at a "comfortable level".

"We can pretty much forget about any changes to interest rates in the near future," they wrote in a post on X.

Inflation in central Europe had 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.

MIDDLE EAST WORRIES

However 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".

Earlier, Iran's Revolutionary Guards said they had targeted U.S. military sites in Bahrain and Kuwait after the U.S. launched a wave of military strikes on Iran in response to attacks on tankers in the Strait of Hormuz.

Oil prices were up around 5% on Wednesday after Trump's remarks.

The zloty eased 0.14% against the euro to 4.3040 by 1420 GMT, off a session low of 4.3174, its weakest since November 2024.

The forint was down 0.9% at 357.90 to the euro, while the Czech crown edged 0.1% lower to 24.2550 per euro.

In Romania, the leu was steady at 5.2333 per euro after Romania's central bank also left its key rate unchanged at 6.5% as expected, at the European Union's highest level.

CEE MARKETS SNAPSHOT AT 1620 CET

CURRENCIES Latest Previous Daily Change in

trade close change 2025

Czech 24.2550 24.2330 -0.09% -0.36%

crown

Hungary 357.9000 354.7500 -0.88% +7.39%

forint

Polish 4.3040 4.2980 -0.14% -2.05%

zloty

Romanian 5.2333 5.2330 -0.01% -2.66%

leu

Serbian 117.2700 117.3400 +0.06% +0.03%

dinar

Note: daily change calculated from 1800 CET

BONDS Yield Yield Spread Daily

(bid) change vs Bund change in

spread

Czech Rep 3.9166 0.0838 +124bp -1bps

2-year s

Czech Rep 4.1462 0.0829 +136bp +0bps

5-year s

Czech Rep 4.6945 0.0000 +163bp -8bps

10-year s

Poland 4.1160 -0.1250 +144bp -22bps

2-year s

Poland 4.8340 0.0040 +204bp -8bps

5-year s

Poland 5.4140 0.0570 +235bp -2bps

10-year s

FORWARD RATE 3x6 6x9 9x12 3M

AGREEMENTS interbank

Czech Rep 4.01 4.14 4.19 3.81

Poland 3.82 3.82 3.83 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 and Jan Harvey)