Headlines
Currencies: CEE currencies stronger despite US consumer disappointment
Fixed Income: Polish CPI fell for second month in row
Czech Republic
The Czech koruna finished weaker last week despite better-than-expected GDP figures. The EUR/CZK pair bounced back above the 25.50 level, but we do not consider the price action as important as the pair trades back below this barrier this morning.
This week, the domestic eco calendar will be much weaker, moreover tomorrow is the national holiday. So, the koruna will focus on core markets as the calendar is much richer while important technical factors would be important too. Still, we think that should global equity markets extend their gains the koruna might target the 25.0 level.
As concern the Czech yield curve it flattened in a bearish fashion on Friday as betterthat- expected GDP figures and the CNB Minutes pushed the front end of the curve a little bit up. The Minutes showed that the Bank Board is clearly divided. It seems that the slim majority wants to keep official rates stable, while there were only very weak arguments, which were articulated in favour of the ‘on hold’ scenario during last meeting (temporary weaker koruna for instance).
| Currencies | change | |
| EUR/CZK | 25.45 | -0.1% |
| EUR/HUF | 267.8 | -0.7% |
| EUR/PLN | 4.089 | -0.7% |
| USD/PLN | 2.748 | -0.7% |
| EUR/USD | 1.498 | 0.7% |
| USD/JPY | 89.5 | -0.8% |
| Bonds 2Y | change | |
| Czech Rep. | 2.15 | 0.15 |
| Hungary 3Y | 7.05 | -0.04 |
| Poland | 4.88 | -0.09 |
| Slovakia | 2.51 | 0.02 |
| Eurozone | 1.20 | 0.00 |
| USA | 0.83 | 0.01 |
| Bonds 10Y | change | |
| Czech Rep. | 4.22 | 0.00 |
| Hungary | 7.46 | 0.01 |
| Poland | 6.14 | -0.01 |
| Slovakia | 4.45 | -0.03 |
| Eurozone | 3.38 | 0.04 |
| USA | 3.42 | -0.01 |
Hungary
The Hungarian forint finished the week in a calm mode at the 269.50 level despite lingering growth concerns after preliminary 3rd quarter growth was -7.2% Y/Y. Market was fairly optimistic about this data with some polls showing -6.5% Y/Y expectation, but it could have been excessive optimism as earlier projections, like the central bank August forecast saw it at -7.3% Y/Y.
The pair begins this week in an optimistic mood and opened at the 267.50 level, so as long as the global background is supportive the pair may see new demand. The turnaround could come with next Monday’s rate decision, but that is a week later.
The Hungarian fixed income market continued to recover with the currency on Friday and yield levels started to narrow the key 7.00% level again. The short-end also advanced a bit lower in yield terms and mid-term FRA prices, like the 3x6 one is now trading at the 5.70% level, underpinning expectations for a sub-6% interest rate environment.
Poland
Polish inflation fell for a second consecutive month, to 3.1% y/y in October, because of the gradual easing of the rise in food and energy prices, which should persist until the end of this year. The zloty more or less ignored the figures as it didn’t bring a major surprise neither to the market nor to the NBP. The zloty strengthened further below 4.10 EUR/PLN despite weak US consumer confidence and a stronger US dollar.
We look for wages and industrial production later during the week. Nevertheless the zloty should more follow the global story, which should be crucial for whether EUR/PLN will test the 2009 lows.
