Zloty surges to 2.5-year high

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Zloty surges to 2.5-year high

Hungarian deflation eases

Speculations about suspension of interest rate hikes in the U.S. after worse than expected payrolls raise attractiveness of the CEE region. The Polish zloty marked the strongest gains yesterday, when it firmed to a 2.5-year high against the euro. Also the Czech koruna firmed, shrugging of signals that the CNB Board might be contemplating unconventional measures (such as negative base rate), in order to reach their inflation target. Like its regional peers, the Hungarian forint also strengthened and reached 298 EUR/HUF.

Regarding today’s trading, the regional releases are likely to support the positive sentiment. Hungarian statistical office (KSH) today published March CPI, which proved that disinflation trend is starting to reverse. According to KSH consumer prices decreased by 0.6 compared to the same month of the previous year, which denote significant upturn from decrease of 1.4 % y/y in January and 1 % y/y in February. The price rise was observed in case of services and alcoholic beverages and tobacco, while motor fuels, electricity, gas and other fuels are still falling. We believe that pick-up in inflation will continue due to relatively strong GDP growth. Good condition of the Hungarian economy was proved also by results of industrial production, which grew in March by 5.8 % y/y and although retail sales results were slightly worse than market has expected, we believe that domestic demand in Hungary remains strong. All in all today’s results are positive for the Hungarian forint as it doesn’t change expectations about future steps of the NBH. The Hungarian central bank has due to relatively high interest rates and strong forint space for interest rate cuts, nevertheless, since Hungary’s macro picture is decent and inflation develops better than expected NBH will continue in its slow gradual approach to monetary easing.