Review
-
As broadly expected, the Romanian central bank (NBR) cut its key policy rate by 50bp to 7.00% on Wednesday morning. The recent strengthening of the Romanian leu combined with the secured tranche of the IMF loan allowed the NBR to cut further. Looking ahead, the NBR will most likely continue its monetary easing, but that will largely depend on development of the Romanian leu given a fairly high risk of spill-over from the Greek situation, triggering pressure on the leu.
-
Turkish inflation accelerated to 8.19% y/y, up from December’s 6.53% y/y, which was slightly more than the consensus had expected. Nonetheless, this fairly sharp increase was more or less expected given the base effect, but also the government’s tax hikes, e.g. for gasoline, tobacco products and alcohol.
Preview
-
The Czech rate decision is the only event on the agenda today. The decision itself is unlikely to be particularly interesting, as it is broadly expected that the Czech central bank (CNB) will leave interest rates unchanged. Greater attention is likely to be paid to new, revised inflation and GDP forecasts due to be released today as well. In our view, there is a reasonable chance that the CNB will revise its GDP forecast for this year in a slightly more positive direction. However, this wouldn’t change our view that it will keep interest rates stable for a fairly long period of time given the non-existent inflationary pressures in the Czech economy going forward.
Trading Update
-
It was relatively calm on EMEA markets on Tuesday. Although the euro zone markets traded positive on Tuesday, the “Greek tragedy” is still at the top of the agenda and risks remain – also in terms of spill-over to CEE markets. Our EMEA FX Scorecard is signalling that there is a risk of a correction in the EMEA FX markets, and more cautious investors might use the present levels of the CEE currencies to hedge income in them.
