160205 ecb fall out for european fx

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FX Watch

Group Economics Macro & Financial Markets Research

05 February 2016

ECB fall-out for European FX Georgette Boele

• More monetary policy easing by the ECB will cause a reaction from…

Co-ordinator FX & Precious Metals

• …other central banks in Europe such as Sweden, Norway, Denmark,

Strategy

Switzerland, Czech Republic, Poland and Hungary

Tel: +31 20 629 7789 georgette.boele@nl.abnamro.com

• They rely on trade with the eurozone and have low inflation… • … so they cannot afford currency strength • The Norges bank will likely cut interest rates in March… • …while the Riksbank could intervene in FX markets • SNB and CNB will likely continue their interventions… • Highly dependent on the eurozone In this FX Watch we focus on the behaviour of central banks in Switzerland, Sweden, Norway, Denmark, Czech Republic, Poland and Hungary. These economies depend for a large part on the fortunes of the eurozone economy, because the eurozone is their main export destination.

Exports to the eurozone as % of total %

Czech exports Hungarian exports Polish exports Norwegian exports Swedish exports Danish exports Swiss exports 0

10

20

30

40

50

60

70

Source: IMF DOTS

For Switzerland, Sweden, Norway and Denmark the percentage is between 30-50%, while for the Czech Republic, Hungary and Poland this percentage is even higher at 60%. It is in the interest of these countries to avoid sharp appreciations of their currencies versus the euro in order to keep their exports competitive.

Insights.abnamro.nl/en


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