GDP growth data in spotlight

Several CEE countries will release flash estimates of 2Q24 GDP growth. We already know how Czechia, Hungary and Serbia performed and this week we will find out about Poland, Romania, Slovakia and Slovenia. In all four countries, we expect growth dynamics of close to or above 2% in y/y terms. Further, in Romania, Serbia and Czechia we will see July’s inflation footprints. Croatia, Poland and Slovakia will release July’s inflation numbers as well, but it will either be the final estimate (Croatia and Poland) or following July’s HICP flash release (Slovakia). As for price development, Czechia will also publish July’s producer price. Finally, Romania and Serbia will release current account data for June, and Poland will publish trade data. On Friday, after market closes, Fitch will publish rating decision for Czechia. We do not expect any change.

FX market developments

Throughout last week, the Czech koruna and the Hungarian forint strengthened against the euro while the Polish zloty depreciated. In Romania and Serbia, the central banks held rate-setting meetings and in Romania the key interest rate was lowered to 6.5% while the Serbian central bank remained on hold. As for other news, the Romanian central bank lowered their year-end inflation forecast to 4%, matching our expectation for inflation development in the second half of the year. We expect monetary easing to continue for the remainder of the year both in Romania and Serbia. This year, July’s inflation footprints in Romania and Czechia may have some market impact, namely in Czechia. At this point, the market is pricing in further rate cuts, so that the key interest rate is below 4% at the end of the year. If inflation proves to be lower than expected, it may further fuel expectations for more aggressive monetary easing. In Hungary, on the other hand, the higher inflation rate cooled expectations for more pronounced rate cuts this year.

Bond market developments

After the sudden compression of yields caused by the selloff on global equity markets last Monday, we have seen a moderate correction of government bond yields on CEE bond markets. The most notable increase of yields was seen in 10Y HGBs (+40bp since Monday’s close), as Hungary’s fixed income market is the most sensitive to the development on the US fixed income market. July’s inflation, which went to 4.1%, also helped to correct interest rate expectations, which had been too aggressive, in our view. FRAs 3x6 on the Hungarian forint went up +30bp since Monday to 6.3%. This week, the auction calendar will be less busy, with ROMGB 2029 and Hungary’s T-bill auction scheduled. 

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