CEE: Switch back to inflation numbers – ING

From central bank policy last week, we switch to inflation and GDP data in the Central and Eastern Europe (CEE) region this week. Today, we start with Czech October inflation, where our economists expect a further rise from 2.6% to 2.9% year-on-year, slightly above market and Czech National Bank expectations. And core inflation should also be higher from 2.3% to 2.6%. Tomorrow will also see the release of inflation in Romania, where we expect a decline from 4.6% to 4.4% YoY and in Hungary from 3.0% to 3.6%, both in line with the market, ING’s FX analyst Frantisek Taborsky notes.  

Market is more focused on the regional angle

“Current account numbers for September in Poland, Czech Republic and Romania will be published on Wednesday. On Thursday, we will see third quarter GDP numbers in Poland and Romania. Poland should see the YoY pace slow from 3.2% to 2.5%, while Romania sees an acceleration from 0.9% to 1.7% YoY. On Friday, we'll see final inflation numbers in Poland confirming a rise to 5.0% in October and the CNB will release minutes from last week's meeting, which could tell us more about the likelihood of a pause in December.”

“As FX finds its place in the new post-election environment, we retain a bearish bias for the CEE region. We view Thursday's market correction and rally as a post-election positioning adjustment but believe CEE cannot escape the negative global outlook. Lower EUR/USD will be the main driver of weakness for CEE FX, but we should also see more negative news from the economy.”

“Rates are still too high across the board despite the rally in recent days and the market has room to price in more rate cuts due to weaker data and a possible dovish ECB move. CEE shorts in USD-crosses seem to be the main direction in the region for now, while EUR-crosses are finding their way. Still, PLN should have some chance to outperform in the region in the medium term due to economic differences and the stage in the cutting cycle. But for now, we believe the market is more focused on the regional angle.”