Czech Republic
Bond auction attracts strong bid
Hungary
MNB cuts the base rate to the new historical low, despite worsening inflation outlook
Poland
EUP/PLN drops again below the 4.0 level
The Week Ahead
Czech industrial output should show another month-on-month gain
Overview
No contagion from Greece, so let’s face tough winter now
The anticipated rate cut by the National Bank of Hungary, to an all-time low was the only major event in the Central European region last week. This week will be similarly poor, as regional news is certainly going to be overshadowed by the key events, such as the ECB meeting, U.S. labour market statistics, or, for example, the Greek attempt to issue more government debt.
However, Central Europe, including both forex and bond markets, is continuing to show incredible resistance from possible contagion from Greece. The forint, zloty and koruna remain stable, while bond prices might continue to rise. We will see whether this picture of Central European markets will be maintained, when the markets will be confronted with poorer hard data from the United States or the euro area. Such data might be due, at least partly, to the extreme winter weather that hit the economies on both sides of the Atlantic in January and February. After all, the weather was also very cold in Central Europe, and thus we may also be in for a surprisingly strong seasonal divergence in certain sectors of our economies (particularly construction).
In conclusion, however, we need to point out that the impact of weather on the performance of the economy, albeit significant, might eventually be discounted by markets in core countries as well as in the region, leaving both CE currencies and bonds largely untouched.
