July 31, 2018 / 10:12 AM / 3 months ago

CORRECTED-CEE MARKETS-Zloty eases, Polish CPI less than expected

 (Corrects throughout: Polish annual inflation was flat in July
rather than accelerating)
    * Zloty eases; Central European currencies, stocks are mixed
    * Polish CPI below forecast
    * Hungary's annual PPI jumps in June, forint firms
    * BMW to build EUR 1 bln car plant in Hungary 

    By Sandor Peto
    BUDAPEST, July 31 (Reuters) - The zloty eased on
Tuesday after data showed lower-than-expected Polish inflation
in July, underpinning the view that interest rates will not rise
any time soon.
    The Polish currency eased 0.14 percent against the euro to
4.277 by 0845 GMT, but was still near seven-week highs of 4.2676
touched in overnight trade.
    Central Europe's main currencies were mixed as the closely
watched dollar index failed to find clear direction,
trading near the multi-week highs reached in recent sessions.
    In Poland, a rise in fuel prices kept the annual inflation
index at 2 percent in July, despite a drop in food prices. 
    The figure was below analysts' 2.1 percent forecast and well
within the Polish central bank's 1.5-3.5 percent target range.
    Poland's was the first July inflation figure published in
the region. Slovenia said later that its annual inflation eased
to 2.1 percent in July from 2.3 percent in June.
    The new figures are unlikely to change the Polish central
bank's loose monetary policy, despite roaring economic growth
driven by rising real wages in Poland and the wider region,
market participants said.
    "Rate stability is the most likely scenario until the end of
2019," Erste analyst Katarzyna Rzentarzewska said.
    Wages have risen strongly across Central Europe, driven by
tight labour markets.
    A recent pick-up in inflation has caused more concern in
Hungary, which is also keeping monetary policy loose, than in
Poland.
    But the worries have eased as the U.S. dollar
stabilised in recent weeks, easing depreciation pressure on the
forint and other Central European currencies.
    The forint traded at 2-week highs on Tuesday, firming 0.1
percent to 321.35 against the euro, and shrugging off a jump in
Hungary's annual producer price index to 7.5 percent in June
from 5.3 percent in May.
    Hungarian economic growth could get a further boost with BMW
 saying on Tuesday it would invest one billion euros in
a new car factory in eastern Hungary, increasing the region's
robust vehicle output     
    "The investment will be spread over years," one
Budapest-based currency dealer said.
    "The cause of the forint's firming is the general global
good mood. Only the Turkish lira is falling in emerging
markets," the dealer said.
    A fixed income trader said Hungarian government bond
auctions on Thursday could draw solid demand and yields could
drop further.
    The paper was steady on Tuesday, while Polish bond yields
dropped by 1-2 basis points as the Bank of Japan's reassurance
that it would keep its ultraloose monetary policy helped
government debt yields drop across the world.
     
            CEE       SNAPSHOT   AT                         
            MARKETS             1045 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.6000   25.5950    -0.02%    -0.23%
 crown      >                                       
 Hungary    <EURHUF=  321.3500  321.6000    +0.08%    -3.25%
 forint     >                                       
 Polish     <EURPLN=    4.2770    4.2712    -0.14%    -2.35%
 zloty      >                                       
 Romanian   <EURRON=    4.6290    4.6250    -0.09%    +1.10%
 leu        >                                       
 Croatian   <EURHRK=    7.4025    7.4000    -0.03%    +0.38%
 kuna       >                                       
 Serbian    <EURRSD=  117.8000  118.0300    +0.20%    +0.59%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1088.23  1094.880    -0.61%    +0.93%
                                       0            
 Budapest             35643.12  35931.23    -0.80%    -9.48%
 Warsaw                2315.32   2327.77    -0.53%    -5.93%
 Bucharest             8044.97   8060.24    -0.19%    +3.76%
 Ljubljana  <.SBITOP    886.19    886.13    +0.01%    +9.90%
            >                                       
 Zagreb                1828.21   1836.15    -0.43%    -0.80%
 Belgrade   <.BELEX1    738.40    740.67    -0.31%    -2.82%
            5>                                      
 Sofia                  631.24    627.71    +0.56%    -6.82%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.3080    0.0850   +190bps     +9bps
            R>                                      
   5-year   <CZ5YT=R    1.7720    0.0990   +197bps    +11bps
            R>                                      
   10-year  <CZ10YT=    2.2200    0.0590   +179bps     +8bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6400    0.0000   +224bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5380   -0.0120   +273bps     +0bps
            R>                                      
   10-year  <PL10YT=    3.1990   -0.0130   +276bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.44      1.65      1.77      1.21
            <PRIBOR=                                
            >                                       
 Hungary                  0.35      0.57      0.77      0.18
                                                    
 Poland                   1.75      1.77      1.83      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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