July 9, 2018 / 9:20 AM / a month ago

CEE MARKETS-Zloty leads recovery despite expected CPI pick-up in region

    * German export, U.S. jobs data, yuan rise underpin CEE
currencies
    * Upcoming CPI figures in the region may show pick-up
    * Polish central bank unlikely to change loose stance

 (Recasts with extended zloty gains, new comments, graphics)
    By Sandor Peto
    BUDAPEST, July 9 (Reuters) - The zloty led Central European
currencies higher as strong German export data and a rebound in
the yuan encouraged the closing of short positions in the
region's oversold markets.
    Some countries in the region are expected to report a rise
in inflation in June this week, but that was less of a worry
after Friday's U.S. job figures did not lead to expectations of 
faster Federal Reserve interest rate hikes.
    The dollar, whose strength has caused a sell-off in
emerging markets in the past months, retreated against the euro.
    The zloty had strengthened 1 percent against the
euro to 4.316 by 1247 GMT, while the Czech crown and
the forint gained 0.2 percent.
    "There has been a strong zloty sell-off in recent weeks. I
do not expect it to rise past 4.2 in the coming weeks, though,"
said Piotr Poplawski, senior economist with ING Slaski in
Warsaw.    
    The forint and the zloty have been the region's top losers
in the past two months' drop in emerging markets, caused by the
dollar's rally and worries that a trade war between the United
States and its partners could hit global growth.
    Monetary policy has been loose in both countries, even
though the Hungarian central bank (NBH) has in the last few
weeks given up its pledge to keep rates at record lows for
years. 
    With investors selling in all liquid markets outside the
United States in the second quarter, worry over a pick-up in
inflation contributed to a fall in the forint to record lows
beyond 330 to the euro by last week.
    It traded at 322.65 on Monday.
    A Reuters poll indicates that Hungary will on Tuesday report
the first rise in annual inflation to above the middle of the
NBH's 2-4 percent target range since January 2013..
    The zloty jumped, even though the Polish central bank (NBP)
is unlikely to change its loose policy stance at its meeting on
Wednesday, analysts said.
    Poland has already released its June inflation figures,
which were below expectations and the NBP's target.      
    Czech and Romanian inflation data due later this week may
also show a pick-up in inflation.
    "The Czech koruna (crown) moved back below EURCZK 26, but
still not enough to please the central bank, which may consider
another hike in August, as the currency remains too weak to meet
the inflation target this year," Erste analysts said in a note. 
  
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1447 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8570   25.9100    +0.20%    -1.22%
 crown      >                                       
 Hungary    <EURHUF=  322.6500  323.3500    +0.22%    -3.64%
 forint     >                                       
 Polish     <EURPLN=    4.3160    4.3582    +0.98%    -3.24%
 zloty      >                                       
 Romanian   <EURRON=    4.6565    4.6600    +0.08%    +0.50%
 leu        >                                       
 Croatian   <EURHRK=    7.4125    7.3964    -0.22%    +0.24%
 kuna       >                                       
 Serbian    <EURRSD=  117.9500  118.0000    +0.04%    +0.47%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1080.09  1077.560    +0.23%    +0.18%
                                       0            
 Budapest             35782.41  35775.73    +0.02%    -9.13%
 Warsaw                2146.12   2152.06    -0.28%   -12.80%
 Bucharest             7855.15   7835.34    +0.25%    +1.31%
 Ljubljana  <.SBITOP    879.94    875.61    +0.49%    +9.12%
            >                                       
 Zagreb                1797.72   1803.60    -0.33%    -2.45%
 Belgrade   <.BELEX1    732.47    736.14    -0.50%    -3.60%
            5>                                      
 Sofia                  628.78    633.69    -0.77%    -7.18%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.2300   -0.0480   +190bps     -5bps
            R>                                      
   5-year   <CZ5YT=R    1.6180   -0.0030   +191bps     -1bps
            R>                                      
   10-year  <CZ10YT=    2.1890   -0.0060   +188bps     -2bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6480    0.0050   +232bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.5270    0.0040   +282bps     +0bps
            R>                                      
   10-year  <PL10YT=    3.1810   -0.0230   +287bps     -4bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.40      1.60      1.74      1.17
            <PRIBOR=                                
            >                                       
 Hungary                  0.62      0.87      1.11      0.29
                                                    
 Poland                   1.76      1.78      1.85      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    
 (Additional reporting by Erika Yip and Marcin Goclowski in
Warsaw
Editing by Andrew Heavens)
  
 
 
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