Czech Republic

January’s foreign trade ended with a historical surplus of CZK 13.1 bn.


Hungary

Central bank sees drop in inflation from 6% to 4% until early summer


Poland

Polish GDP confirms solid recovery, rate hikes seen in the second half of the year


The Week Ahead

Week in a sign of Czech and Hungarian inflation


Overview

The NBP Noted the Possibility of a Rate Hike and Unleashed the Zloty

The Polish zloty has been unleashed. It strengthened by 5% against the euro over the last month. The bullish run on the Polish forex market is more than understandable, because Poland has felt the real impact of the global crisis on the economy to a lesser extent than most of Europe, and is the only economy of the EU that posted positive growth in 2009. Thus the convergence story (catching up with the developed countries, in real terms, accompanied by the real appreciation of the exchange rate) still holds true, and the Polish current account has even improved significantly over the last two years, being only slightly in the red. Given this, it is probably no surprise to hear new calls coming from the National Bank of Poland, that the bank should, in the near future, be one of the first in the EU to raise rates. The prospects for the widening interest rate differential between Poland and the euro area are, during the ever greater global recovery, another huge stimulus for taking long positions in the zloty. What is more, we believe that it would be worth holding those positions for a longer time than just a few weeks or months.

The reason is that even the medium-term outlook for the zloty remains highly positive. The Polish economy is among those in the EU that are the most immune to the economic crisis, and thus the real convergence story continues virtually uninterrupted. In addition, over the next two years, Poland will be encouraged by the increasing inflow of funds from Brussels and the preparations for the 2012 European Football Championship, as well as by positive demographic trends. All of this together will contribute to the swift improvement in domestic demand, stronger inflationary pressures, and thus the need to keep interest rates higher…