CEE trade openness grows, exporting mostly within the EU

Erste Bank Research Team Erste Bank

On the radar

The ECB cut the deposit rate by 25 basis points on Thursday to 2.75%
2024 GDP in Poland surprised to the upside arriving at 2.9%.
December’s retail trade increased in Croatia by 6.5% y/y while industry grew by 5.3% y/y.
In Hungary, producer prices increased by 9% y/y in December.
In Czechia, 4Q24 flash GDP landed at 1.6% y/y and 0.5% q/q. This brings the 2024 annual growth to 1.0%.
At noon, Serbia will publish 4Q24 GDP data alongside retail sales and industrial output growth.

Economic developments

Over last two decades, all CEE countries have become more open and increased their trade activity as share of GDP. Most of it happens within Europe. Actually, between 70% and 80% of trade is intra-EU trade. Only Serbia has a lower share, as 57% of its exports and imports is within the EU. Further, most of the CEE countries improved their current account and trade balance position. One of the factors of influence was the development of trade of services as CEE countries experienced an increase in the export of services as a share of GDP. Croatia, Poland and Slovenia most notably. The trade activity supports employment in the region and across the EU. In the region, the extra-EU trade supports between 18% of jobs (Hungary, Romania) to as much as 30% of jobs in Croatia. As far as structure is concerned most of the export-related jobs are in services. More on trade developments in the region can be found in our latest special report: Trade developments in the region.

Market movements

As had been widely expected, the ECB Governing Council decided to cut the deposit rate by a further 25 basis points to 2.75%. The decisive factors were the inflation outlook, the dynamics of underlying inflation and the transmission of monetary policy. The decision was unanimous. The CEE currencies have been quite strong and stable this week while the long end of the curve moved down. The market stress seems to have calmed, and such development supports Romanian bond market to greatest extent as 10Y yields dropped toward 7.4%. from above 8% at the beginning of January.

Download The Full CEE Macro Daily

Author

Erste Bank Research Team

Erste Bank

At Erste Group we greatly value transparency. Our Investor Relations team strives to provide comprehensive information with frequent updates to ensure that the details on these pages are always current.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.