January 3, 2018 / 10:12 AM / 6 months ago

CEE MARKETS-Polish data seen showing CPI decline

    * Polish annual Dec CPI, due at 1300 GMT, seen falling
    * Zloty, forint, crown give up some of Tuesday's gains
    * Czech central bank sees overheating risk, watches others

    By Sandor Peto and Bartosz Chmielewski
    BUDAPEST/WARSAW, Jan 3 (Reuters) - Central European
currencies gave up some of their early-year gains on Wednesday
ahead of Polish data that could show a retreat in inflation,
cutting pressure on the central bank to tighten policy. 
    Analysts expect the figures due at 1300 GMT to show a fall
in the annual inflation rate to 2.15 percent in December from
2.5 percent in November, pushed down by food and fuel prices.
    Poland is usually the first state in the eastern wing of the
European Union to report monthly inflation figures, and the
region's inflation rates often move in tandem.
    The figures came on the heels of robust Czech, Hungarian and
Polish PMI manufacturing indices released on Tuesday, which
confirmed strong economic growth, partly fuelled by a regional
surge in wages.
    The new Polish inflation figures are expected to show a
decline.     
    The zloty and the Hungarian forint
weakened by 0.1 percent against the euro by 0931 GMT, to 4.1659
and 309.5, respectively.
    The zloty, which was the world's top-performing currency
last year along with the Czech crown, touched its strongest
levels since August 2015 on Tuesday.
    Polish inflation could dip below 2 percent early this year
as there are no administered price increases and food prices
remain low, ING analysts said in a note.
    BZ WBK analysts said the inflation drop should not affect
Polish government bonds.
    KBC, however, said in a note that "a slowdown in consumer
inflation could trigger some profit taking on the zloty, because
it will cool down hopes that the NBP (will) bring (interest
rates higher) later this year".
    Hungary's central bank has been the least worried over a
rise in inflation in the region since mid-2016. It has even
loosened monetary conditions further.
    The Czech central bank (CNB), on the contrary, has increased
its record low interest rates twice since August to fight
inflation. The Czech inflation target is 2 percent, the lowest
in Central Europe.
    In the minutes of its December meeting, it quoted some of
its board members as saying that robust wage growth and other
labour market indicators reflected a risk of economic
overheating.
    It repeated that the timing of further rate hikes was
conditional on macroeconomic variables, including the crown's
exchange rate.
    It added, though, that in many other countries monetary
policy was even more accommodative, "and a rising interest rate
differential could not be ignored in a small open economy", like
the Czech Republic.
    The crown weakened a quarter of a percent to
25.576 against the euro. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1031 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5760   25.5125    -0.25%    -0.13%
 crown      >                                       
 Hungary    <EURHUF=  309.5000  309.1750    -0.11%    +0.46%
 forint     >                                       
 Polish     <EURPLN=    4.1659    4.1628    -0.07%    +0.25%
 zloty      >                                       
 Romanian   <EURRON=    4.6390    4.6488    +0.21%    +0.88%
 leu        >                                       
 Croatian   <EURHRK=    7.4470    7.4605    +0.18%    -0.22%
 kuna       >                                       
 Serbian    <EURRSD=  118.6600  118.3700    -0.24%    -0.13%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1087.73  1083.650    +0.38%    +0.89%
                                       0            
 Budapest             39416.62  39443.57    -0.07%    +0.10%
 Warsaw                2467.13   2461.21    +0.24%    +0.24%
 Bucharest             7805.65   7753.74    +0.67%    +0.67%
 Ljubljana  <.SBITOP    803.05    806.38    -0.41%    -0.41%
            >                                       
 Zagreb                1846.71   1839.22    +0.41%    +0.21%
 Belgrade   <.BELEX1    745.35    759.80    -1.90%    -1.90%
            5>                                      
 Sofia                  682.92    684.71    -0.26%    +0.81%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.6940    0.2180   +132bps    +22bps
            R>                                      
   5-year   <CZ5YT=R    0.8810    0.0590   +108bps     +7bps
            R>                                      
   10-year  <CZ10YT=    1.6550    0.0000   +120bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.7340    0.3060   +236bps    +31bps
            R>                                      
   5-year   <PL5YT=R    2.6510    0.0010   +285bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.3220    0.0040   +287bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.06      1.25      1.38      0.00
            <PRIBOR=                                
            >                                       
 Hungary                  0.03      0.06      0.18      0.03
                                                    
 Poland                   1.76      1.81      1.91      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Reporting by Sandor Peto)
  
 
 
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