November 8, 2019 / 10:55 AM / 10 days ago

CEE MARKETS-Forint underperforms on surprise increase in inflation

    By Krisztina  Than
    BUDAPEST, Nov 8 (Reuters) - Hungary's forint eased on Friday
versus the euro and underperformed its Central European peers as
October inflation came in above expectations while the Hungarian
central bank has been sticking to its ultra-loose monetary
policy.
    Headline inflation picked up to 2.9% in October, while the
central bank's key tax-adjusted inflation number also rose to
3.7% in October from 3.4% in September, data showed.

    "Today's data also signals ... that after the low in
September, inflation started to accelerate in October and this
is expected to last until the year end and it is conceivable
that the headline figure will climb close to 4% at the end of
the year," ING analyst Peter Virovacz said in a note.
    Hungary's benchmark base rate is at 0.9% while the overnight
deposit rate is at -0.05%. 
    "This is one factor in the forint's weakness ... that we
have the loosest monetary policy in the region," one dealer in
Budapest said. 
    She said the forint's slide this week could also be due to
technical factors. The Hungarian currency failed to firm past a
key resistance at 328, and then it resumed its easing trend,
falling to 333.60 on Friday.
    At 0954 GMT the forint was down 0.3% versus the
euro, while the Czech crown and the Polish zloty
 were both weaker by 0.1%. The forint has eased 3.75%
so far this year.
    Central banks in Central Europe have adopted a cautious
stance lately, assessing the potential impact of a slowdown in
the euro zone on economies of the eastern region of the EU. So
far, the region's economic growth has been robust but there are
signs of a moderation.
    Next week's releases in CEE countries of flash GDP data for
the third-quarter are expected to signal that a slowdown is
around the corner, despite solid domestic demand growth and
tight labour markets, analysts at Morgan Stanley said.
    "Looking further ahead, we think that the slowdown in growth
will become more visible, more specifically in 1H20," they said.
    "This is likely to add to CEE central bank concerns and will
introduce further uncertainty about the growth outlook for the
region. Yet, we think that domestic inflation pressures will
remain in place for a while, which we think will prevent the
regional central banks from turning outright dovish for a
while."
    On Thursday, the Czech central bank kept its rates on hold,
but the votes showed a continuing debate over a possible hike.
The bank voted 5-2 to keep rates on hold.
    Czech central bank Governor Jiri Rusnok said the bank's
preference to keep interest rates stable and not hike like its
forecast model suggests would not lead to any substantial rise
in inflation.
    The Czech central bank is one of the few in Europe still
debating a rate hike even as the European Central Bank and U.S.
Federal Reserve have already starting easing policy to safeguard
their economies.
    Poland's central bank governor said on Wednesday he expected
stable interest rates until his term ends in 2022 as the bank's
policy council left borrowing costs unchanged.
    
                    CEE     SNAPSH   AT                          
                    MARKET  OT      1054             
                    S               CET              
                            CURREN                               
                            CIES                     
                            Latest  Previou  Daily   Change
                                    s                
                            bid     close    change  in 2019
 EURCZK=   Czech    <EURCZ  25.543  25.5210  -0.09%        +0.64%
           crown    K=>          0                   
 EURHUF=   Hungary  <EURHU  333.60  332.835  -0.23%        -3.75%
           forint   F=>         00        0          
 EURPLN=   Polish   <EURPL  4.2628   4.2590  -0.09%        +0.63%
           zloty    N=>                              
 EURRON=   Romania  <EURRO  4.7610   4.7607  -0.01%        -2.25%
           n leu    N=>                              
 EURHRK=   Croatia  <EURHR  7.4295   7.4283  -0.02%        -0.26%
           n kuna   K=>                              
 EURRSD=   Serbian  <EURRS  117.44  117.410  -0.03%        +0.73%
           dinar    D=>         00        0          
           Note:    calculated               1800                
           daily    from                     CET     
           change                                    
                                                                 
                            Latest  Previou  Daily   Change
                                    s                
                                    close    change  in 2019
 .PX       Prague           1077.3  1081.05  -0.35%        +9.20%
                                 2       00          
 .BUX      Budapes          43186.  43598.1  -0.94%       +10.34%
           t                    40        9          
 .WIG20    Warsaw   <.WIG2  2256.1  2272.17  -0.70%        -0.90%
                    0>           6                   
 .BETI     Buchare  <.BETI  9692.0  9680.24   +0.12       +31.26%
           st       >            0                %  
 .SBITOP   Ljublja  <.SBIT  863.13   866.98  -0.44%        +7.32%
           na       OP>                              
 .CRBEX    Zagreb   <.CRBE  1980.3  1975.07   +0.26       +13.24%
                    X>           0                %  
 .BELEX15  Belgrad  <.BELE  749.60   752.63  -0.40%        -1.59%
           e        X15>                             
 .SOFIX    Sofia    <.SOFI  558.64   558.87  -0.04%        -6.03%
                    X>                               
                            BONDS                                
                            Yield   Yield    Spread  Daily
                            (bid)   change   vs      change in
                                             Bund    
           Czech                                     spread
           Republi                                   
           c                                         
 CZ2YT=RR           <CZ2YT  1.3230   0.0430   +194b         +5bps
           2-year   =RR>                         ps  
 CZ5YT=RR           <CZ5YT  1.2550   0.0790   +180b         +9bps
           5-year   =RR>                         ps  
 CZ10YT=R           <CZ10Y  1.6070   0.0700   +186b         +8bps
 R         10-year  T=RR>                        ps  
           Poland                                                
 PL2YT=RR           <PL2YT  1.4130  -0.0030   +203b         +0bps
           2-year   =RR>                         ps  
 PL5YT=RR           <PL5YT  1.8570   0.0080   +240b         +2bps
           5-year   =RR>                         ps  
 PL10YT=R           <PL10Y  2.1680   0.0360   +243b         +5bps
 R         10-year  T=RR>                        ps  
                    FORWAR  RATE    AGREEME                      
                    D               NT               
                            3x6     6x9      9x12    3M interbank
           Czech    <CZKFR    2.29     2.31    2.31          2.18
           Rep      A><PRI                           
                    BOR=>                            
           Hungary  <HUFFR    0.27     0.31    0.36          0.19
                    A><BUB                           
                    OR=>                             
           Poland   <PLNFR    1.72     1.71    1.71          1.71
                    A><WIB                           
                    OR=>                             
           Note:    are for ask                                  
           FRA      prices                           
           quotes                                    
 

    
    
 
   
    
     

 (Reporting by Krisztina Than and additional reporting by Robert
Muller in Prague ; Editing by)
  
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