The pace of the economy's decline has slowed further after April. Industry and agriculture remain key GDP drivers while IT and transport remain under sanctions pressure. Meanwhile, goods and services trade undergoes adjustments due to the sanctions.
FX markets have moved closer to a commonly shared scenario and in the absence of additional volatility shocks, exchange rates have stabilized after a dynamic first quarter. On global markets, this scenario mirrors central banks which are closing in on their terminal rate levels, rate cuts though not imminent, core inflation stabilizing, and economic momentum speaking for a soft rather than hard landing. For EUR/USD this implies sideways at 1.10. In CEE the appreciation of CE-3 came to a halt with the Polish złoty catching up to its peers at the very last minute. The Czech koruna had to shed some feathers after sentiment grew overly optimistic. With CNB and Fed meetings today and ECB tomorrow, FX markets are on the lookout for impulses which can challenge the current status quo.
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