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New Europe Weekly
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Latvian crisis takes centre stage
Fri, Oct 9 2009, 20:21 GMT
by Lars Christensen
Key events next week
Next week is scheduled to bring September inflation figures in a number of countries. We expect Polish inflation to remain flat compared to previous months and in Hungary we expect it to inch slightly up. It should prove worth paying attention to the release of Polish labour market data.
Other than this plenty of figures from Russia are due out.
Latvia is set to remain in the spotlight.
Fixed income outlook
The rally in the EMEA fixed income markets has continued this week with yields falling sharply, especially in Russia and Turkey, where lower than expected inflation numbers have helped to push down yields. Furthermore, Czech yields fell somewhat on the back of speculation that the Czech central bank continues to ease its monetary policy further and we start to speculate whether the Czech central bank will introduce some form of
quantitative easing (QE).
Contrary to this, yields fell the least in Poland and South Africa where the monetary policy cycle has come to an end.
FX outlook
It has been a rather volatile week for the FX markets in EMEA. While the ZAR and the TRY have strengthened during week, the central & eastern European (CEE) currencies have been under pressure. We judge that rising uncertainties in the Baltics (especially in Latvia) and political jitters in Poland and Romania weigh on sentiment in core CEE
currencies.
Our EMEA FX Scorecard is heading toward neutral territory for most currencies. In general global growth factors are turning less supportive for the EMEA currencies. Although still in positive territory there is no doubt that global macro indicators have disappointed somewhat over the past month. Our EMEA FX Scorecard nonetheless continues to be most bullish on Polish zloty. PLN is supported by increased carry relatively to the region, since Polish market rates have been fairly stable recently. On the
other hand our FX Scorecard turned slightly bearish on CZK in the past week. The score on CZK has been dragged down by falling market rates, as market participants begin to speculate about rate cuts from the CNB, following dovish comments from the central bank recently.
Published on Fri, Oct 9 2009, 20:46 GMT
Archive
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Published On Fri, Nov 20 2009, 07:53 GMT - Between liquidity flooding and unattractive valuations
Published On Fri, Nov 13 2009, 13:36 GMT - The correction is not over yet
Published On Fri, Nov 6 2009, 13:13 GMT - On a knife-edge for the EMEA markets
Published On Fri, Oct 30 2009, 14:12 GMT - Carry protection disappearing in EMEA
Published On Fri, Oct 23 2009, 13:45 GMT
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