July 31, 2018 / 10:09 AM / 10 months ago

CEE MARKETS-Zloty eases, Polish CPI below forecast

    * Zloty eases; Central European currencies, stocks are mixed
    * Polish CPI below forecast, Slovenian inflation retreats
    * Analysts expect Czech central bank to hike rates on

 (Recasts with new analyst comments, analyst poll on Czech
    By Sandor Peto
    BUDAPEST, July 31 (Reuters) - The zloty eased on Tuesday
after Poland released lower-than-expected inflation figures for
July, which underpinned the view that interest rates will not
rise any time soon.
    Central Europe's main currencies still traded near
multi-week highs because in the past weeks investors closed some
of the selling positions opened since April.
    They were hit in the second quarter by a sell-off in
emerging markets as the dollar rallied, while inflation was
picking up in the fast-growing region.
    In the region's first July 2018 inflation figures released
by Poland on Tuesday, a rise in fuel prices kept the annual
index at 2 percent in July, despite a drop in food prices. 
    But the figure was below analysts' 2.1 percent forecast and
well within the Polish central bank's (NBP) 1.5-3.5 percent
target range. Slovenia's own data showed a drop in inflation to
2.1 percent in July from 2.3 percent in June. 
    The zloty eased 0.2 percent to 4.2785 against the
euro by 1234 GMT.
    Analysts said the figures were unlikely to lead to a change
in the NBP's loose policy stance. It may keep its main rate on
hold at 1.5 percent through this year and 2019, some analysts
    "Since our inflation forecasts suggest the headline
inflation will fall in ... (the second half of this year) we
don't think the central bank’s position will be challenged by
investors," Citi analysts said in a note.
    The region's recent inflation rise was mainly driven by fuel
prices, while core inflation moves slow, Bank of America Merrill
Lynch analyst Doan Mai said in a note.
    "Only in the Czech Rep(ublic) do we see a steadier uptrend
in core CPI," she said.    
    Ten of 13 analysts in a Reuters poll projected that the
Czech central bank (CNB) could deliver its 5th rate hike since
August 2017 at its meeting on Thursday.
    Analysts have said the CNB would create policy room with the
hikes for the case of an economic slowdown. The Czech Finance
Ministry lowered its growth forecasts on Tuesday.
    The crown, after getting a boost from comments from central
bankers suggesting a hike, has got stuck around the 25.6 level
against the euro, still weaker than the CNB's predictions.
    Global market jitters have fuelled fears that the crown may
weaken through levels which generate stop-loss selling, and
global trade tensions have also kept foreigners cautious over
the crown, Commerzbank analyst Melanie Fischinger said.
    "By the end of the year, we expect the koruna (crown) to
appreciate, not least due to imminent interest rate hikes," she
    In Hungary, investors continued to close earlier forint
 selling positions, and the currency tested a
psychological line at 320 against the euro.
    "We do not see (Hungarian) policy rate hikes until 2H 2019,
but upside risks to interbank rates are high and dependent on
the HUF, which is likely vulnerable to further sell-off if the
markets decide to test the NBH again," the Citi note said.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1434 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.5950   25.5950    +0.00%    -0.21%
 crown      >                                       
 Hungary    <EURHUF=  320.7000  321.6000    +0.28%    -3.05%
 forint     >                                       
 Polish     <EURPLN=    4.2785    4.2712    -0.17%    -2.39%
 zloty      >                                       
 Romanian   <EURRON=    4.6260    4.6250    -0.02%    +1.16%
 leu        >                                       
 Croatian   <EURHRK=    7.4025    7.4000    -0.03%    +0.38%
 kuna       >                                       
 Serbian    <EURRSD=  117.9000  118.0300    +0.11%    +0.51%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1094.07  1094.880    -0.07%    +1.48%
 Budapest             35556.18  35931.23    -1.04%    -9.70%
 Warsaw                2317.85   2327.77    -0.43%    -5.82%
 Bucharest             8020.57   8060.24    -0.49%    +3.44%
 Ljubljana  <.SBITOP    888.39    886.13    +0.26%   +10.17%
 Zagreb                1820.70   1836.15    -0.84%    -1.20%
 Belgrade   <.BELEX1    738.97    740.67    -0.23%    -2.74%
 Sofia                  632.72    627.71    +0.80%    -6.60%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.2660    0.0430   +185bps     +4bps
   5-year   <CZ5YT=R    1.7660    0.0930   +194bps     +9bps
   10-year  <CZ10YT=    2.2240    0.0630   +177bps     +7bps
   2-year   <PL2YT=R    1.6400    0.0000   +222bps     -1bps
   5-year   <PL5YT=R    2.5450   -0.0050   +272bps     -1bps
   10-year  <PL10YT=    3.2110   -0.0010   +276bps     +0bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                1.44      1.65      1.77      1.22
 Hungary                  0.34      0.53      0.74      0.17
 Poland                   1.74      1.77      1.83      1.70
 Note: FRA  are for ask prices                              

 (Reporting by Sandor Peto
Editing by Matthew Mpoke Bigg)
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