Most CEE FX markets remained relatively stable throughout the week. Only Romanian leu development was more profound. The EURRON hit an all-time low in the aftermath of the newly introduced government measures (bank tax among others). In the meantime, the zloty remains locked at 4.29-4.30 vs. the EUR. The EURHUF was hovering around 321 throughout the week and the Czech koruna has been holding close to 26.5, supported by hawkish comments.
-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% EURHRK EURCZK EURHUF EURPLN EURRON YTD W-W Expected move until end of 1Q appreciation depreciation The introduction of the new measures also resonates on the Romanian interest rate market. The short end of the curve dropped visibly, while 10Y yields went marginally up (4bp) throughout last week. Romania also faced weaker demand at the government auction. The new budget details (due in late January) will be decisive for our yield forecast. In Serbia, the first issuance of the 7Y bond this year hit the upper range of expected yield (4.57%). At this point it is hard to distinguish whether this is the “first issuance” effect or the outcome of increased political tensions. In other CEE countries, we saw upward correction on yields. This week, however, market sentiment is likely to depend on German GDP data.
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