European Markets

FX gains as higher-than-expected CPI data fuels rate hike hopes

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BUDAPEST, Jan 14 (Reuters) - Central European currencies firmed on Friday, as higher-than-expected inflation data in Hungary and Romania indicated that rate hikes could continue in the region.

Hungarian headline inflation was unchanged at 14-year highs of 7.4% year-on-year in December, exceeding analyst forecasts. The central bank's tax-adjusted core inflation gauge accelerated to 6.4% in December from 5.3% in November.

"In light of today's data we expect the rate hike cycle of the National Bank of Hungary to continue in the next months," Peter Virovacz, senior economist at ING wrote.

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The forint was stable, trading at 354.86 per euro. It has firmed more than 4% in the past two weeks, lifted by higher central bank rates. The bank's next rate-setting meeting is scheduled for Jan. 25.

"The firming we saw was really fast, so based on technical indicators we could see a correction soon," an FX trader in Budapest said.

The Romanian leu was up 0.02% and trading at 4.9430 per euro as consumer price inflation exceeded expectations and rose to 8.19%, its highest in a decade.

The typically steady leu has gained 0.11% this month and is around levels it last traded at in September.

Romania's central bank raised its benchmark interest rate by 25 basis points to 2.00% earlier this week. read more

Elsewhere, the Polish zloty firmed 0.09% to 4.5370 versus the common currency. The Czech crown gained 0.46% and was trading at 24.429 per euro after it fell in a correction in the previous session.

Most stocks in the region slid, with Budapest (.BUX) leading losses as it shed 1.72%. Prague (.PX) eased 0.31% while Warsaw (.WIG20) was 0.64% lower. Bucharest (.BETI) bucked the trend and gained 1.56%.

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Additional reporting by Alan Charlish in Warsaw; Editing by Amy Caren Daniel

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