CEE: Inflation and current account data

In the Eurozone, there are no major data releases scheduled this week, but in the US, inflation data and retail sales will be published. Markets will pay close attention to core inflation as an indication of the next steps from the US Fed. The testimony of the new Fed chairman will also receive some market attention. In the region, we will see inflation data in several CEE countries. Only in Romania and Serbia has June inflation not been published yet. In other countries, the structure will be released. Other than that, we will see industrial output growth in Romania in May, as well as current account data. Current account positions will also be published in Poland, Slovakia and Serbia. Finally, Romania and Slovakia will release wage growth, while Czechia will publish producer prices for June.

FX market developments

CEE currencies weakened more visibly against the euro in the middle of last week in reaction to global developments. In particular, the US strikes on Iran renewed worries about the continuation of the Middle East conflict. Toward the end of the week, reassurance that peace talks were continuing stabilized the markets, and CEE currencies regained some of their strength. Other than that, lower-than-expected inflation in Czechia (1.5% y/y in June), as well as dovish comments from Poland’s central bank Governor Glapinski, could add to the weakening of the currencies of these two countries. EURPLN moved toward 4.35 at the end of the week. Although Poland kept the policy rate unchanged at last week’s meeting, the press conference delivered reasons to speculate about a rate cut in Poland in September, as the governor himself said he would raise such a motion to lower rates by 25 basis points. FRA 9x12 rates in Poland declined and are below FRA 9x12 rates in Czechia. This is an interesting development, because the new inflation and growth projections do not support monetary easing, in our view. As for other central bank meetings in the region, Romania and Serbia kept key interest rates unchanged, and in these two countries, inflation developments do not allow for any moves. For the time being, we expect rates to remain stable until the end of 2026 in all three countries. This week, US data releases will be the key driver of the FX market in the region.

Bond market developments

Long-term yields increased last week across the region, reflecting global developments and fears that the war in Iran will resume. Locally, Hungary sees the budget deficit at 7.5% in 2026 and has outlined steps to tackle the deficit. Hungary returned to the international bond market with a EUR 3bn bond issuance, marking the first major transaction under the new government. The state debt manager, ÁKK, sold EUR 1.5bn of five-year bonds and EUR 1.5bn of ten-year bonds. Final spreads were set at 80 basis points over mid-swaps for the five-year notes and 125 basis points for the ten-year bonds. Croatia was also active on the bond market, with a larger-than-expected issuance of EUR 1.25bn of 5Y tenor, priced at 3.08%. EUR 400mn will go to refinancing a maturing bond, and the rest will be used to meet budget gap financing needs. After the auction, issuance stands at 80% of the FY bond issuance target. This week, Czechia, Poland and Romania will be placing government papers on the market.

Download The Full CEE Market Insights