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CE markets are awaiting the ECB meeting
Polish industry surprises positively in December
While regional government bonds like core bond markets have been facing sell-off ahead of today’s ECB meeting, CE currencies have been mixed. While the Czech koruna firms a bit and the forint stays unchanged, the zloty actually firmed following a release of December’s industrial figures.
Recalls that compared to previous two months the Polish industrial production grew by robust 8.4% y/y, so the growth of industrial production reached 3.3% in 2014. That’s positive news for the zloty, however on the other hand producer produce price continued to fall deeply (minus 2.2 y/y), so overall yesterday’s Polish data were a mixed bag for the NBP.
Nevertheless, all regional markets have been waiting for today’s key ECB meeting. The ECB is about to take an historical step by announcing a sovereign debt QE-programme to add to their arsenal of easing programmes. This is widely expected, but the details will determine the effectiveness and credibility of the programme and of the ECB’s commitment to reach its inflation mandate. Regarding size, the WSJ/Bloomberg floated (based on “ECB officials”) yesterday monthly purchases of €50B/month for at least 10 months and maximum 22 months. The WSJ scenario (€500B) is the absolute lower threshold of market expectations, the latter scenario is rather bullish. We think investors could take profit on the European bond rally. It could sound somewhat strange but given the extreme market positioning (long bonds), a disappointing outcome could force investors to take some, short term, chips off the table as well. This scenario might apply to CE bond markets too, while for regional currencies the conclusion might be rather mixed.
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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