CNB decision in focus as CEE data test growth momentum

This week's macro calendar will provide evidence on manufacturing, inflation and domestic demand across CEE, while the CNB meeting will be the key policy event. The week opens with Manufacturing PMIs. We expect Poland's index to rebound after June's decline, while Romania's survey should show whether activity is stabilizing. Attention will then turn to Czech inflation, which should remain below the CNB's target despite a rise in package-holiday prices. Later releases should clarify momentum; for instance, Czech industrial production is expected to grow by around 2% y/y, Hungarian industry only modestly, and Hungarian retail sales strongly. Slovak retail activity should remain barely positive, while the trade surplus stays sizeable as exports outpace imports. For Thursday’s CNB meeting, we expect unchanged rates, although another hike before year-end may be discussed. On the other hand, Hungarian inflation should ease further on softer food prices. A downside risk is reduced output at the Paks nuclear plant, the country's largest electricity source, estimated to generate up to 50% of domestic demand, as low Danube levels and elevated water temperatures constrain cooling. However, Imports should secure supply, but industrial shutdowns could weigh on output, GDP and the budget.

FX market developments

CEE currencies showed mixed performance. The Czech koruna weakened slightly as markets scaled back expectations of further CNB tightening, while concerns over a potentially wider 2027 budget deficit added some pressure. The Hungarian forint underperformed, heading toward its sharpest monthly loss since October 2024, with the partial shutdown of the Paks nuclear plant adding to local concerns. In Poland, cautious comments from policymakers reduced expectations of a post-summer rate cut and supported the zloty. Looking ahead, CZK upside appears limited, while HUF remains vulnerable and PLN relatively resilient.

Bond market developments

CEE bond markets were influenced by shifting rate expectations and local supply. Czech government-bond yields remained elevated as investors assessed the likelihood of prolonged restrictive CNB policy, although yields corrected after comments from board member Kubíček reduced expectations of further tightening. In Romania, attention turned to issuance, with the Finance Ministry planning to raise around RON 7.2bn in domestic debt next month, including a large reopening of the 6.4% 2028 bond. Looking ahead, Czech yields may ease if tightening expectations fade further, while Romanian supply could keep local yields under pressure.

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