May 2, 2019 / 9:56 AM / 20 days ago

CORRECTED-CEE MARKETS-Crown off 3-week highs as CNB meets after weak PMI figures

 (In para 12, please read publication date May 13 (rather than
May 10)
    * CNB meets, hike is a close call; crown flat, off 3-week
high
    * Czech, Polish PMIs stay in contraction territory
    * Forint touches 5-month low, regains ground after strong
PMI

    By Sandor Peto and Robert Muller
    BUDAPEST, May 2 (Reuters) - The crown traded flat on
Thursday, off three-week highs against the euro ahead of the
Czech central bank's (CNB) meeting where it may resume its
interest rate hikes.
    Central Europe's first April 2019 inflation data, released
in Warsaw early this week, showed a continuing acceleration,
adding to the odds of a Czech rate hike. 
    But Thursday's weak April purchasing managers' index (PMI)
figures from Prague and Poland argued against monetary
tightening.
    The main indexes were below the 50 mark, which separates
economic growth from contraction, and the Czech index at 46.6
was below analysts' forecast of 47.6.
    At 0900 GMT, the Czech crown was at 25.63 versus
the euro, retreating from a 3-week high of 25.588 hit in 
international trade on Wednesday when domestic markets were
closed due to the May Day holiday.
    It failed to benefit from a softer dollar unlike the
forint and the zloty which firmed slightly.
    In a Reuters poll published on Monday, most analysts
predicted a quarter percentage point rise in the CNB's main
interest rate to 2 percent at Thursday's meeting.
    But it was still regarded as a close call as six out of 14
analysts forecast no change in the rate. [nL5N22B41X 
    Czech forward rate agreements (FRAs) pointed towards a 40
percent chance of a rate hike on Thursday, even though the
latest comments from two rate setters indicated that a hike may
have a majority in the CNB's seven-member board.
    The CNB's new inflation forecasts will almost certainly
point towards a rate rise, Komercni Banka traders said in a
note.
    That was the case in the bank's last forecasts, too, but
that time a hike was "postponed mostly due to global risks – now
with the Brexit moved to autumn a few of the CNB board members
seemed to have joined the hawkish camp", they added.
    The Czech Republic is due to release April inflation figures
on May 13. 
    Hungary's own figures are due to come earlier, next week,
and could trigger further forint volatility, market participants
said. 
    The forint weakened in illiquid international
trade on Wednesday and set a 5-month low at 324.85 early on
Thursday. It regained some ground after strong Hungarian PMI
figures came out.
    It has been weakening as the National Bank of Hungary did
not signal any further measures to fight inflation after its
meeting on Tuesday.
    "If inflation comes in lower than expected next week, the
forint may weaken out of its recent 320-325 range," one
Budapest-based trader said, adding that a high figure could
reignite expectations for monetary tightening.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1100 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.6300   25.6290    -0.00%    +0.30%
 crown      >                                       
 Hungary    <EURHUF=  324.4500  324.5500    +0.03%    -1.04%
 forint     >                                       
 Polish     <EURPLN=    4.2797    4.2832    +0.08%    +0.23%
 zloty      >                                       
 Romanian   <EURRON=    4.7585    4.7580    -0.01%    -2.20%
 leu        >                                       
 Croatian   <EURHRK=    7.4140    7.4120    -0.03%    -0.05%
 kuna       >                                       
 Serbian    <EURRSD=  117.8800  117.9700    +0.08%    +0.36%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1079.79  1068.720    +1.04%    +9.45%
                                       0            
 Budapest             42528.89  42520.11    +0.02%    +8.66%
 Warsaw                2330.47   2334.21    -0.16%    +2.36%
 Bucharest             8473.30   8441.95    +0.37%   +14.76%
 Ljubljana  <.SBITOP    887.95    887.95    +0.00%   +10.41%
            >                                       
 Zagreb                1835.98   1837.98    -0.11%    +4.98%
 Belgrade   <.BELEX1    744.04    744.04    +0.00%    -2.32%
            5>                                      
 Sofia                  572.97    575.06    -0.36%    -3.62%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7340    0.1270   +233bps    +13bps
            R>                                      
   5-year   <CZ5YT=R    1.8000    0.0360   +221bps     +3bps
            R>                                      
   10-year  <CZ10YT=    1.8960    0.0020   +188bps     -1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.7040    0.0120   +230bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.3760    0.0270   +278bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.0320    0.0220   +301bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.24      2.26      2.26      2.05
            <PRIBOR=                                
            >                                       
 Hungary                  0.33      0.49      0.69      0.16
                                                    
 Poland                   1.76      1.77      1.82      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 

 (Additional reporting by Radu Marinas in Bucharest; editing by
Emelia Sithole-Matarise)
  
 
 
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