Rising bets on CNB's rate cut

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Rising bets on CNB´s rate cut

Regional PMIs weaker than expected but still strong

The Central European currencies experienced another calm session yesterday. As for the zloty, neither a revision of the Polish GDP for the third quarter 2015 nor a flash CPI estimate for November had a visible impact. Similarly the Czech koruna ignored comments by CNB’s governor Singer reiterating lasting need for easy monetary conditions despite a relatively strong economic growth. We can interpret Mr. Singer’s remarks as another assurance that the exit from the intervention regime won’t be hastened rather than a hint at further monetary easing. Interestingly enough, market bets on a CNB rate cut have risen significantly over the past few days. The most likely explanation of the development is that also the ECB has been widely expected now to deliver a rate cut next Thursday.

Regarding fresh regional PMI figures, those came out slightly weaker than predicted both in Poland and the Czech Republic. In the latter country, although the downfall in the new orders component of the PMI may look worrisome the overall index still remains well above the breakeven level of 50 points. As for Poland, the index value reached 52.1 points and hence changed only little m/m. A record-long period of the employment sub-index hovering above the 50 points level has been promising a strong support for the economy from the side of households’ consumption during the quarters to come.


Currencies		% chng
EUR/CZK	27.02	0.0
EUR/HUF	310.5	-0.4
EUR/PLN	4.27	0.0
EUR/USD	1.06	-0.3
EUR/CHF	1.09	-0.4


FRA 3x6	%	bps chng
CZK	0.14	-4
HUF	1.34	0
PLN	1.60	-2
EUR	-0.22	0


GB	%	bps chng
Czech Rep. 10Y	0.53	0
Hungary 10Y	3.31	-5
Poland 10Y	2.69	7
Slovakia 10Y	0.70	1


CDS 5Y	%	bps chng
Czech Rep.	51	0
Hungary	156	0
Poland	72	0
Slovakia	50	0

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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.