Yet another quiet day in terms of economic data today

EMEA Daily

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Review

Polish industrial production in December disappointed with growth of 7.4% y/y, which was below November’s 9.8% y/y and much less than the consensus of 12.2% y/y.
Industrial production in Lithuanian further indicated a recovery trend in December with the pace of the slowdown decelerating to 7.3% y/y. Furthermore we expect to see a positive outcome as early as January 2010, but it should be mentioned that a strong positive base effect would play an important role.
Central Bank of Russia (CBR) plans to introduce monthly periodicity in the policy rate decision procedure. It is likely to be introduced in 2010, possibly even in the first half of this year. Currently the CBR re-examines the policy rate irregularly; therefore it is always an unexpected contingency for the market. This initiative could increase the influence of CBR credit policy on financial markets. We very much welcome the new initiative.
Yesterday the Latvian parliament gave the government a mandate for further talks with IMF/EU. This is good news as the government will finally be able to sign a new memorandum letter to the IMF and receive the next financial tranche. However, the biggest party in Parliament, the Peoples Party, voted against and the vote was won only thanks to the opposition voting in favour. This is a clear indication that political tension between the two coalition parties is significant.

Preview

Yet another quiet day in terms of economic data today.

Trading Update

EMEA FX markets gained some ground on Thursday afternoon as the USD gave up some of its gains.
Czech rates increased considerably yesterday afternoon as the market has begun to price in fairly aggressive monetary tightening from the central bank. In our view, a 75bp rate hike by the end of the year is aggressive given the fact that the Czech recovery is losing momentum and will only be moderate amidst a low inflation environment.

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Published On Fri, Jan 22 2010, 06:32 GMT

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