Central banks, rating reviews and elections over upcoming weekend

The week kicks off with the release of PMI data for March across the region. Additionally, we will be privy to the flash inflation data for Croatia and other Eurozone countries (April’s flash HICP releases). On Thursday, the Polish and Romanian central banks are scheduled to hold their rate setting meetings, and we do not expect any changes in policy rates. Moving on to Friday, Hungary, Slovakia, and Romania will publish their respective retail sales growth for February, with Hungary also releasing their industrial output growth data on top of that. Lastly, on Friday after market close, Fitch is scheduled to review Croatia’s rating and outlook, and S&P is set to release their rating and outlook review for Serbia. We believe that in Serbia, there are favorable chances for a positive outlook change. This upcoming weekend, Slovakia will hold its presidential election, where citizens will decide between Pellegrini (ruling coalition) and Korcok (associated with opposition parties). Lastly, Poland will hold its local elections.

FX market developments

The CEE currencies have remained relatively strong against the euro throughout last week, with EURHUF dropping to 393 and EURPLN going down to 4.30. This week, both Polish and Romanian central banks are holding rate setting meetings, though no changes in the key policy rates are expected in either country. In Poland, voices supporting rate stability throughout 2024 have been heard, with MPC member Duda recently stating that there is no room for an interest rate cut this year, a view shared by Maslowska. She further added that the possibility of discussing rate cuts would only arise in the second half of 2025 or early 2026. In contrast, Romania is preparing to begin monetary easing in the coming months. Additionally, Croatia and Serbia are set to be scrutinized by Fitch and S&P, respectively. In the case of Serbia, we see solid chances for a positive outlook change, particularly given recent comments from the central bank governor, Tabakovic, who stressed that a rating upgrade is a priority for policymakers.

Bond market developments

Hungarian government bond yields moved up in the aftermath of the central bank meeting at which the central bank slowed down the pace of monetary easing. At the same time it indicated that rates could land between 6.5-7% by June, implying further slowdown of the pace of monetary easing to about 50bp cut per meeting. Poland’s 10Y rallied on weekly basis and outperformed regional peers. This week, the Czechia will reopen CZECHGBs 2033, 2034, Hungary will sell HGBs 2026, 2029, 2035 and both will offer T-bills on top of that.

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