KBC Market Research Desk
KBC Bank
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Leading indicators signal weaker end of the year
CE currencies weaker after worse German Ifo report
Epidemic of weak demand proliferating in the euro area has been posing a growing threat to Central Europe. Our leading indicators for Central Europe (Flashes) are deteriorating from Warsaw through Prague to Budapest. The Czech and Hungarian Flashes have dropped to their lowest levels since a year, while their Polish counterpart has reached its 17-month low.
The generally disappointing result should not veil differences obvious in case of a more detailed analysis. In the Czech Republic, recent Flashes used to fall virtually exclusively because of adverse developments happening abroad (as reflected, for instance, by the deteriorating German Ifo index). In Hungary and, in particular, in Poland, all components of their respective (CSOB) Flash indicators, including new orders and domestic PMI, are weakening. Nonetheless, the rapid fall in the German business sentiment observed in the recent months has been the greatest bugbear also for those economies.
Today´s negative surprise in the German Ifo has been plainly bad news for the whole of Central Europe. Both the Polish zloty and the Hungarian forint got about 0.5 % weaker this morning. For the week ahead, the single major event in the region should be an NBH meeting. We expect the central bank to stay flat at 2.50%.
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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