Polish markets might start to eye upcoming elections

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Thin regional calendar after important macro releases,
Polish markets might start to eye upcoming elections

A quick look at hard monthly data in the region shows that industry, as the most important driver of growth, performed well before the affair, while inflation remained at very low levels because of the fall in fuel prices. This view may change in a month’s time because industrial output data may, at least in part, be adversely impacted by VW’s diesel scandal and inflation may also climb. Here we should realise that VW has large production facilities in the Czech Republic as well as Hungary (Škoda and Audi respectively) and that the drop in petrol prices will certainly not reoccur in October. In addition, the positive base-effect related to a sudden fall in oil prices late last year will slowly (and positively) start to influence year-on-year inflation in months to come.

In the days to come, however, the regional events that will interest markets will include politics rather than macroeconomic data. Parliamentary elections will be held in Poland in two weeks’ time, and the current liberal government, which has been very popular with the markets, can become an opposition party. A possible change of the government could make Polish financial markets volatile, all the more so because certain programme items promoted by the conservative opposition (PiS), which is the favourite in the upcoming elections according to opinion polls, are not quite market-friendly. Nevertheless, unlike similar episodes in the past, we do not expect contagion to spread to the rest of the region if selloff of (Polish) assets were to occur ahead/after the elections.


Currencies		% chng
EUR/CZK	27.07	-0.2
EUR/HUF	311.1	0.0
EUR/PLN	4.21	-0.1
EUR/USD	1.14	0.7
EUR/CHF	1.09	0.2


FRA 3x6	%	bps chng
CZK	0.25	0
HUF	1.34	2
PLN	1.72	-2
EUR	-0.04	1


GB	%	bps chng
Czech Rep. 10Y	0.63	-1
Hungary 10Y	3.30	7
Poland 10Y	2.68	1
Slovakia 10Y	0.86	2


CDS 5Y	%	bps chng
Czech Rep.	49	0
Hungary	166	-1
Poland	76	0
Slovakia	48	-1

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This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.