The Polish zloty gave up early gains (posted on better than expected manufacturing PMI) later in the day on Monday and weakened after the Statistical Office released flash inflation estimate for October. In the meantime, regional government bonds were under small pressure and 10-year yields went up as a result of a similar move in the euro zone.
Regarding the Polish inflation, the flash estimate showed prices were falling by 0.8 % Y/Y which was a slight negative surprise both for us and the market. Although the details will be published in two weeks, we suspect that low commodity prices were the main reason of weaker inflation. While bets on further monetary policy easing remained virtually unchanged and markets still price in one 25 bps rate cut in 6 - 9 month horizon, the zloty slightly weakened.
Yesterday’s inflation figures indicate that the extension of deflation period into the first quarter of 2016 seems to be likely now which is an interesting piece of information with respect to the meeting of the National Bank of Poland that starts today (and will conclude tomorrow).
Meanwhile, the Hungarian forint hit a one-month low against the euro while the koruna was only little changed yesterday. In this respect it is worth adding that the Hungarian central bank (NBH) indicated that it would extend its Lending for Growth program by 600 billion forint into 2016. According to initial news the half of the amount could be used for FX lending and the other for HUF lending. Regarding this measure the NBH will hold a press conference today at 2 p.m.
| Currencies | % chng | |
| EUR/CZK | 27.07 | 0.0 |
| EUR/HUF | 312.7 | 0.8 |
| EUR/PLN | 4.26 | 0.3 |
| EUR/USD | 1.10 | 0.1 |
| EUR/CHF | 1.09 | 0.0 |
| FRA 3x6 | % | bps chng |
| CZK | 0.25 | 1 |
| HUF | 1.33 | 4 |
| PLN | 1.67 | -1 |
| EUR | -0.12 | 0 |
| GB | % | bps chng |
| Czech Rep. 10Y | 0.56 | 6 |
| Hungary 10Y | 3.46 | 5 |
| Poland 10Y | 2.72 | 4 |
| Slovakia 10Y | 0.92 | 9 |
| CDS 5Y | % | bps chng |
| Czech Rep. | 50 | 0 |
| Hungary | 163 | 0 |
| Poland | 74 | 0 |
| Slovakia | 50 | 0 |
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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