May 15, 2019 / 9:28 AM / 2 months ago

CEE MARKETS-Robust GDP data fail to boost currencies amid uncertain outlook

    * GDP growth in CEE is higher than forecast
    * Wage surge fuels inflation, export outlook uncertain
    * Daimler confirms postponing plant expansion in Hungary
    * Forint at lowest in more than five months
    * Budapest stocks rebound

    By Sandor Peto and Luiza Ilie
    BUDAPEST, May 15 (Reuters) - The forint fell to its weakest
since November on Wednesday after robust first-quarter economic
data from Central Europe failed to ease concern over inflation
in the region and growth in Europe.
    Output figures from the Czech Republic, Hungary, Poland,
Romania and Slovakia showed faster-than-expected annual growth.
    But the forint touched a five-and-a-half month low
of 325 to the euro. The Polish zloty and Romanian leu
 also weakened.
    Hungary's growth picked up to 5.3%, its fastest rate in 15
years. But the news coincided with a confirmation
from German car maker Daimler that it had postponed
further expansion of a Hungarian plant.
    Domestic economies remain the key to growth in Central
Europe. A slowdown in the euro zone, the region's key export
market, raises worries. So does the threat of U.S. tariffs on
European car imports.
    Germany's economy returned to quarterly growth in the first
quarter, but annual growth at 0.7% was well below the 2.5% and
5.3% growth rates reported in Central Europe on Wednesday.  
    Investors are expected to watch the comments of the Polish
and Romanian central banks closely after their meetings on
Wednesday. They are expected to keep interest rates on hold, but
may comment on a rise in inflation in April.
    "We expect hawkish rhetoric at today's press briefing (in
Bucharest) and the strict liquidity control pledge to be
reiterated," ING analysts said in a note. "Without some
augmentation of the policy toolkit, however, the pledge is
likely to lose credibility."
    The Hungarian central bank is unlikely to tighten policy at
its meeting late this month, since GDP growth may slow and the
bank expects a retreat in inflation late this year, market
participants said.
    Regional equities gained, tracking a rebound in Asia caused
by hopes the United States and China will resolve their trade
disputes, averting a protracted trade war. 
    Budapest's blue-chip stock index rose 0.6%, regaining some
ground from its three-month low on Tuesday, as shares of OTP
Bank rebounded.
    Regional government bond yields tracked a drop in Bunds.
Ten-year Polish bonds traded at 2.83%.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1026 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7460   25.7460    +0.00%    -0.15%
 crown      >                                       
 Hungary    <EURHUF=  324.8000  324.4500    -0.11%    -1.14%
 forint     >                                       
 Polish     <EURPLN=    4.3100    4.3086    -0.03%    -0.47%
 zloty      >                                       
 Romanian   <EURRON=    4.7610    4.7600    -0.02%    -2.25%
 leu        >                                       
 Croatian   <EURHRK=    7.4150    7.4125    -0.03%    -0.07%
 kuna       >                                       
 Serbian    <EURRSD=  117.7900  117.9000    +0.09%    +0.43%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1053.23  1050.310    +0.28%    +6.76%
                                       0            
 Budapest             40330.57  40084.64    +0.61%    +3.04%
 Warsaw                2176.34   2163.94    +0.57%    -4.41%
 Bucharest             8167.87   8135.82    +0.39%   +10.62%
 Ljubljana  <.SBITOP    864.14    863.12    +0.12%    +7.45%
            >                                       
 Zagreb                1838.09   1840.89    -0.15%    +5.11%
 Belgrade   <.BELEX1    733.01    735.08    -0.28%    -3.77%
            5>                                      
 Sofia                  562.18    563.42    -0.22%    -5.43%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6070   -0.1550   +226bps    -14bps
            R>                                      
   5-year   <CZ5YT=R    1.7160    0.0080   +222bps     +3bps
            R>                                      
   10-year  <CZ10YT=    1.8320   -0.0260   +193bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6990    0.0020   +236bps     +2bps
            R>                                      
   5-year   <PL5YT=R    2.2070   -0.0190   +272bps     +0bps
            R>                                      
   10-year  <PL10YT=    2.8410   -0.0250   +293bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.22      2.22      2.19      2.20
            <PRIBOR=                                
            >                                       
 Hungary                  0.35      0.52      0.69      0.16
                                                    
 Poland                   1.75      1.75      1.77      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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