April 10, 2019 / 9:50 AM / 13 days ago

CEE MARKETS-Currencies firm on data showing March CPI near policy ceiling

    * CPI hits top of target range in Prague, above it in
Bucharest
    * Fx firming is cautious ahead of ECB meeting and on tariff
risk
    * Leu rebounds, ROBOR interbank rate reverses decline 

    By Sandor Peto
    BUDAPEST, April 10 (Reuters) - Central European currencies
mostly firmed on Wednesday after a batch of March figures showed
that annual inflation is near the policy ceiling in most of the
region's main economies.
    Inflation in the Czech Republic picked up to 3 percent, the
top of the central bank's (CNB) 1-3 percent target range.

    Romania's inflation rose to 4 percent, edging further off
the 1.5-3.5 percent target range.
    Hungary's own data earlier showed bigger-than-expected
pick-up to 3.8 percent, near the top of the 2-4 percent target
range.
    The forint firmed 0.2 percent against the euro to
321.86, edging off Tuesday's 3-month lows, the crown
and the zloty firmed less than 0.1 percent, while the
leu rebounded from a one-week low.
    The market reaction is muted because of uncertainty whether
the inflation rise leads to monetary tightening.
    Poland's inflation remains moderate. 
    Risks to economic growth in Europe point towards lower
imported inflation and dovish comments from the European Central
bank's meeting on Wednesday, market participants said.
    Czech headline inflation is close to its peak, but core
inflation could stay steady near 3 percent, Erste Group analyst
David Navratil said in a note.
    "We do not change our forecast of one (CNB interest rate)
hike this year (August); however, the risk is tilted towards the
May meeting," he said.
    If the risk of Britain leaving the European Union without a
deal is averted, thus reducing risks to economic growth, the CNB
could focus on domestic factors again and increase rates,
Navratil said.
    Another key risk watched is a U.S.-EU trade war and tariffs
on vehicle imports from the EU, which could hit Central Europe's
flourishing car industry, analysts said.
    In Romania, the trade deficit widened quickly anyway due to
a surge in wages and consumption across the region, as February
data showed on Tuesday.
    The data put pressure on the leu, but it steadied on
Wednesday as the ROBOR overnight interbank rate
returned to higher levels after some easing earlier this week.
    The Romanian central bank kept interest rates on hold last
week, but its governor signalled it would act to tighten money
market liquidity while inflation remained above target.
    
    Once the Brexit issue is resolved, attention in the region
could turn towards the auto tariffs risk, Morgan Stanley
analysts said in an April 9 note.
    "We still see scope for some tightening in the Czech
Republic and Hungary, though the risks of a more dovish policy
path have risen, particularly in the latter," they said.
     
            CEE       SNAPSHOT   AT                         
            MARKETS             1031 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6200   25.6310    +0.04%    +0.34%
 crown      >                                       
 Hungary    <EURHUF=  321.8600  322.4500    +0.18%    -0.24%
 forint     >                                       
 Polish     <EURPLN=    4.2845    4.2867    +0.05%    +0.12%
 zloty      >                                       
 Romanian   <EURRON=    4.7610    4.7605    -0.01%    -2.25%
 leu        >                                       
 Croatian   <EURHRK=    7.4290    7.4300    +0.01%    -0.26%
 kuna       >                                       
 Serbian    <EURRSD=  117.8100  117.9300    +0.10%    +0.42%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1086.89  1083.420    +0.32%   +10.17%
                                       0            
 Budapest             41988.24  42063.94    -0.18%    +7.28%
 Warsaw                2374.91   2367.84    +0.30%    +4.32%
 Bucharest             8303.00   8301.40    +0.02%   +12.45%
 Ljubljana  <.SBITOP    873.26    873.64    -0.04%    +8.58%
            >                                       
 Zagreb                1798.56   1796.87    +0.09%    +2.84%
 Belgrade   <.BELEX1    732.48    733.02    -0.07%    -3.83%
            5>                                      
 Sofia                  577.64    576.58    +0.18%    -2.83%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7270   -0.1340   +230bps    -13bps
            R>                                      
   5-year   <CZ5YT=R    1.7320    0.0340   +218bps     +3bps
            R>                                      
   10-year  <CZ10YT=    1.8560    0.0010   +186bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6640   -0.0010   +224bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.2320   -0.0080   +268bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.9190   -0.0020   +292bps     +0bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.13      2.18      2.18      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.35      0.51      0.69      0.16
                                                    
 Poland                   1.74      1.74      1.74      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    
 (Additional reporting by Luiza Ilie in Bucharest;
Editing by Andrew Cawthorne)
  
 
 
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