May 22, 2019 / 10:26 AM / a month ago

CEE MARKETS-Strong Polish industrial data lends zloty temporary relief

    * Global trade tension lends moderately negative mood
    * Polish industrial output, PPI rise briefly help zloty
    * Forint off 9-month low but near it ahead of cbank meeting

    By Sandor Peto
    BUDAPEST, May 22 (Reuters) - Central Europe's main
currencies eased slightly on Wednesday as global trade tensions
weighed on risk appetite, although a jump in Polish industrial
output gave the zloty brief respite.
    Assets in the region were largely rangebound as emerging
markets moved in line with the neighbouring euro zone,
with the forint and the zloty easing
slightly against the euro by 0856 GMT.
    The zloty briefly regained some ground after April data
showed a robust 9.2 percent annual rise in Polish industrial
output and an unexpected slight pick-up in producer prices.

    Data released in recent weeks indicates that robust economic
growth continues, but central banks show no signs that they will
increase interest rates to fight accelerating inflation.
    There is no need to change Polish interest rates in 2019,
but a rise in 2020 cannot be ruled out, Polish rate-setter Rafal
Sura said after Wednesday's figures.
    "For those members of the (Monetary Policy) Council who are
worried by accelerating inflation... the very good data on
industrial production will be an impulse to think about rate
hikes," said Monika Kurtek, chief economist at Bank Pocztowy.
    "It is unlikely, however, that there will be a majority in
the Council that would vote in favour of such a proposal," she
    Polish government bond yields, instead of rising after the
strong figures, tracked a mild drop in Bunds.
    While Poland's inflation ran well within the central bank's
1.5-3.5% target range in April, Hungary's 3.9% figure was near
the top of the National Bank of Hungary's 2-4% range.
    The forint weakened to 9-month lows against the euro in the
past few sessions as the bank is not expected to tighten policy
at its meeting on May 28, nor possibly at its June meeting,
market participants have said.
    Resistance at 327.6 against the euro gave some relief to the
currency, which may be temporary.
    "Given the fundamentals, with strong growth and rising
inflation, with a neutral or mildly negative global backdrop,
the forint is where it should be," one Budapest-based dealer
    "This is not a definite risk off mood, I would rather say
investors handle emerging market assets cautiously. Why should
they buy the forint now?... while they have no reason for a
strong sell-off either," the dealer added.
            CEE       SNAPSHOT   AT                         
            MARKETS             1056 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7810   25.7860    +0.02%    -0.29%
 crown      >                                       
 Hungary    <EURHUF=  326.6500  326.5000    -0.05%    -1.70%
 forint     >                                       
 Polish     <EURPLN=    4.3094    4.3075    -0.04%    -0.46%
 zloty      >                                       
 Romanian   <EURRON=    4.7630    4.7650    +0.04%    -2.29%
 leu        >                                       
 Croatian   <EURHRK=    7.4240    7.4270    +0.04%    -0.19%
 kuna       >                                       
 Serbian    <EURRSD=  117.8600  117.9400    +0.07%    +0.37%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1043.51  1048.330    -0.46%    +5.77%
 Budapest             39961.42  39575.98    +0.97%    +2.10%
 Warsaw                2189.70   2190.93    -0.06%    -3.82%
 Bucharest             8104.48   8152.63    -0.59%    +9.76%
 Ljubljana  <.SBITOP    859.50    859.62    -0.01%    +6.87%
 Zagreb                1858.38   1858.22    +0.01%    +6.27%
 Belgrade   <.BELEX1    730.73    733.09    -0.32%    -4.06%
 Sofia                  571.31    568.83    +0.44%    -3.89%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.7280    0.0900   +234bps     +8bps
   5-year   <CZ5YT=R    1.7090    0.0420   +220bps     +5bps
   10-year  <CZ10YT=    1.8400   -0.0010   +191bps     +1bps
   2-year   <PL2YT=R    1.6980    0.0130   +231bps     +1bps
   5-year   <PL5YT=R    2.2550   -0.1400   +275bps    -14bps
   10-year  <PL10YT=    2.8930   -0.0250   +297bps     -1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.22      2.20      2.16      2.20
 Hungary                  0.40      0.58      0.76      0.00
 Poland                   1.74      1.75      1.76      1.72
 Note: FRA  are for ask prices                              

 (Additional reporting by Warsaw newsroom; Editing by Alexander
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