Review
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Estonian CPI decreased by 0.7% y/y in January. The outcome was lower than our -0.2% y/y estimate and was mainly due to our underestimating the decline in prices for non-regulated goods and services such as clothing and footwear, which dropped by -3.8% m/m. As expected, the hike in excise duties pushed up consumer prices in January.
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Hungarian preliminary industrial production in December disappointed when it showed a rise of only 1% y/y, versus consensus expectation of 4.8% y/y. The number confirms that the Hungarian economy remains very fragile, and we remain pessimistic on the outlook for the economy going forward.
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On Friday, Czech President Vaclav Klaus announced that the general election will be held on May 28 – 29.
Preview
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Latvian inflation due for release today will most likely show an ongoing deflationary trend. We expect deflationary pressure to accelerate in January and CPI to decline by 2.7% y/y down from -1.2% in December.
Trading Update
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Last week we recommended buying ZAR/CZK based on our EMEA FX Scorecard. Over the past week, that trade has performed quite well. This week, however, the highest scoring currency, or the least negative score, is the PLN, while the lowest scoring currency is CZK. Therefore we recommend buying PLN/CZK going into this week. Nonetheless, we must stress that our EMEA FX Scorecard shows a negative score for all currencies included in our EMEA FX Scorecard and we still recommend caution with the euro-sensitive CEE currencies, especially the HUF and the CZK, which remain highly sensitive to negative news flow concerning Greece and other troubled eurozone countries.
