Mixed data on Retail Sales and industrial output

This week will see a mixture of data releases and central bank announcements. On Monday, only Hungarian trade balance figures are to be published. Czech industrial production on Tuesday is forecasted at modest y/y growth of 0.1%. On the same day, Romania’s unemployment rate and PPI figures will be shown, while Hungarian retail sales are expected to reflect a weak base effect and low consumer confidence. Slovak retail sales on are expected to return to positive figures y/y, supported by real wage growth and lower inflation. Romania’s retail sales on Wednesday are also projected to grow monthly, although the annual figure may decelerate due to base effects. Hungarian industrial production on Wednesday shows no significant improvement, reflecting ongoing sectoral challenges. On Thursday, the Polish central bank is expected to hold rates steady, and Croatia’s and Serbia’s PPI figures will be published. On Friday, Slovak industrial production is expected to grow monthly but may decline y/y, and Hungarian CPI figures are expected to stagnate before potentially increasing in May. Slovenia’s industrial production is expected to continue its recovery in March, and Serbia’s central bank rate is anticipated to remain unchanged, awaiting moves from the ECB.

FX market developments

Stronger economic readings and a more cautious stance of central banks towards the future pace of rate cuts had a positive impact on CEE currencies. The EURHUF dived below 390 and the EURCZK returned to 25. The Czech koruna has been supported by the new CNB forecasts, which now expect rates not to be cut so aggressively as was assumed in the previous forecast. We keep our baseline year-end forecast of the policy rate at 4%, which is actually very close to the current CNB’s projection. This week’s central bank meetings in Poland and Serbia should not bring any change in rates as both central banks remain in wait-and-see mode.

Bond market developments

CEE government bonds rallied last week in reaction to the FED’s announcement that QT will be done at a slower pace and the subsequent decline of yields on US Treasuries. The long end of the HGBs yield curve witnessed the largest move (-30bp w/w), followed by CZECHGBs (about -10-20bp). The ROMGBs curve remained unaffected due to closed markets (orthodox Easter holiday). This week, Romania will reopen ROMGBs 2026, 2028, 2031 and 2033 while Slovenia and Hungary will offer T-bills.

Download The Full CEE Insights