FX shrugs off larger than usual Fed rate cut

Central European currencies were little changed on Thursday, remaining in ir recent ranges after US Federal Reserve's decision to start its easing cycle with a larger than usual interest rate cut. Fed lowered its window for benchmark policy rate by 50 basis points to 4.75 per cent-5 per cent, as expected by many trers. 

" most important storyline for CEE is definitely yesterday's jumbo-sized rate cut from Fed," said Peter Virovacz, senior ecomist at ING in Hungary. "Altoger it seems markets don't necessarily believe Fed dot plot, which suggests only 50 basis points of easing in total for remainder of year, market is pricing in rar 70ish basis points, as a result dollar is weakening a bit... and it gives CEE a kind of stability." 

Hungarian forint was 0.05 per cent weaker against euro at 394.65. Czech crown was 0.10 per cent softer at 25.081 and Polish zloty shed 0.09 per cent to tre at 4.2655. A Warsaw-based trer said he would have expected big rate cut to help CEE currencies but this h t been case. 

"I guess this decision was pretty much in market alrey, it was discounted," trer said. In central Europe, attention is w turning to an interest rate decision in Hungary scheduled for Tuesday. "Maybe forint is going to be a bit weaker, market might be expecting some more dovish rhetoric from central bank after this jumbo-sized Fed rate cut as central bank of Hungary mentioned on several occasions that y are focussing on major central banks decisions," said Virovacz.