CEE insights: Growth structure, PMIs and flash inflation releases

Erste Bank Research Team Erste Bank

The week opens with February PMI releases across the region, namely in Czechia, Hungary, Poland and Romania. The manufacturing PMI indices have been below the threshold of 50 for quite a while, suggesting ongoing contraction of the industry sector. A couple of countries will publish flash inflation estimates for February (Croatia and Czechia), while several CEE countries will release the GDP structure for 4Q24 and for all of 2024. So far, we have seen GDP breakdowns in Czechia, Croatia, Poland and Serbia. Private consumption was a key driver of economic expansion. The performance of the retail and industry sectors at the beginning of the year will be released in Croatia, Hungary, Romania and Slovakia. Finally, Czechia will publish wage growth in the fourth quarter of 2024, which is an important indicator for monetary policy decisions.

FX market developments

CEE currencies have been strong against the euro. The EURHUF briefly went below 400 and the EURPLN touched 4.12 - the lowest level in a decade. We see a combination of global and local factors behind recent developments on the FX market. The news regarding the peace deal between Russia and Ukraine are positive for the currencies in the region. On the other hand, trade wars bring a high level of uncertainty, which is negative for the FX market. Locally, delayed monetary easing, especially in Hungary and Poland, keeps the interest rate differential very high, supporting lower EURHUF and EURPLN levels. In Hungary, a change in the leadership of the central bank will take place next week. Initial communication will be scrutinized regarding the monetary policy direction in 2025. At this point, we stick to monetary easing of a total 50 basis points in 2025. This week, the ECB meeting will be a key event for the markets.

Bond market developments

Long-term yields have declined across the region over the last week, most notably in Romania, as the long end of the curve shifted by roughly 20 basis points. Romania’s Ministry of Finance indicated a gross funding need for 2025 in the amount of RON 232bn. Financing the planned 7% of GDP budget deficit accounts for around RON 135bn (45% financed from internal sources and 55% from external ones). We estimate that around 20% of the gross funding needs for this year has already been covered. Slovakia will hold a retail bond auction on Monday, offering 2Y and 4Y maturities with 3% and 3.3% coupons. The total size of both issues together will not exceed EUR 500mn. This week, Hungary plans to sell T-Bills, while Poland will hold bond auctions.

Download The Full CEE Market Insights

Author

Erste Bank Research Team

Erste Bank

At Erste Group we greatly value transparency. Our Investor Relations team strives to provide comprehensive information with frequent updates to ensure that the details on these pages are always current.

AUD/USD slides as US yields jump before pivotal CPI

The Australian Dollar ended Thursday’s session with a 0.80% loss against the US Dollar after US producer inflation exceeded estimates, triggering pricing for a more hawkish Federal Reserve. The AUD/USD trades at 0.7159 after reaching a peak of 0.7223.

USD/JPY consolidates around 153.50 as bears turn cautious ahead of US inflation

USD/JPY stabilizes above 153.50 during the Asian session on Thursday, but remains near a seven-month low set earlier this week as hawkish BoJ repricing continues to underpin the Japanese Yen. Meanwhile, rising September Fed rate-hike bets and escalating US-Iran tensions help ease US Dollar selling pressure, offering some support to the currency pair ahead of US inflation figures.

Gold remains weak, retargets $4,350

Gold keeps the choppy price action on Thursday, now slipping back toward the $4,350 region per troy ounce amid the robust bounce in the US Dollar as well as rising US Treasury yields across the curve, particularly following US Producer Prices and ahead of Friday’s more relevant US CPI data.

Bitcoin holds steady on positive ETF flows despite short-term holders cashing in

Bitcoin's exchange-traded funds (ETF) demand regime has notably shifted, with 30-day net inflows reaching $21.9 billion, according to a Thursday post by CryptoQuant. The data suggests that the average Bitcoin held through spot ETFs is now in profit, with the realized price of the ETF cohort standing at roughly $72,000 to $73,000.

ECB recap: A hawkish hike despite downside growth risks

The European Central Bank (ECB) increased the Deposit Facility Rate to 2.50%, the Refinancing Rate to 2.65% and the Marginal Lending Facility to 2.90%, effective from September 16. The decision was accompanied by a clear warning that the outlook remains highly uncertain, with risks tilted to the upside for inflation and to the downside for growth.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.