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CEE MARKETS-Currencies drop on output data as Poland seen holding rates
September 6, 2017 / 9:23 AM / 3 months ago

CEE MARKETS-Currencies drop on output data as Poland seen holding rates

    * Czech, Hungarian, German industry data misses forecasts
    * Polish market focus on central bank's comments
    * Assets rangebound in run-up to ECB meeting

    By Sandor Peto
    BUDAPEST, Sept 6 (Reuters) - Central European currencies
weakened on Wednesday after Hungary and the Czech Republic
reported much weaker than expected industrial output figures for
July.
    The figures did not change the perception that Central
European economies are powering ahead, but a surprise fall in 
industrial orders in Germany, the region's key export market,
soured the mood.
    Investors are watching for any signs of concern at the
European Central Bank, which holds a policy meeting on Thursday,
over the strength of the euro against the dollar  - a cross
closely watched in Central European markets.
    Before then the NBP, the central bank of the region's
biggest economy, Poland, is likely to keep interest rates at
record lows at its meeting on Wednesday.
    Many analysts expect its next move to be a hike in late
2018, and some anticipate the bank's rhetoric could turn less
dovish as soon as Wednesday after recent economic data that
fleshed out a picture of robust growth.
    But Polish government bond yields extended a run lower --
with five-year paper trading at 2.54 percent to take its drop to
9 basis points over the past week -- and the zloty
dipped along with other regional currencies, drifting off
six-week highs to 4.2399 against the euro by 0821 GMT. 
    The forint and Czech crown eased by 0.1
percent, to 306.44 and 26.115, respectively, while regional
stock indices moved little.  
    Industrial output rose by 3.3 percent in annual terms in the
Czech Republic in July, well below analysts' 6.7 percent
forecast, while the Czech trade account posted a deficit instead
of an expected surplus.
    Hungary's output growth slowed sharply to 0.2 percent, below
analysts' 7.5 percent forecast.
    In Poland, negative real interest rates and a labour
shortage, which boost wages, have already made some Polish
rate-setters uneasy.
    "The MPC (Monetary Policy Council) may think that the NBP
view summarized in the August statement on the monetary policy
decision has been too dovish and will make its tone more
neutral," KBC analysts said in a note. 
    With policy developments also uncertain at the ECB and the
Federal Reserve and national elections looming in Germany,
Central European markets are expected to remain rangebound for
the time being, a Budapest-based fixed income trader said.
    "The market teeters from one event to the other, without
clear directions," the trader said. "Volatility has become much
lower."
       
               CEE MARKETS  SNAPSH   AT  1021 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                26.115  26.087  -0.11%   3.42%
                                 0       5          
 Hungary                    306.44  306.02  -0.14%   0.78%
 forint                         00      00          
 Polish zloty               4.2399  4.2376  -0.05%   3.87%
 Romanian leu               4.5975  4.5960  -0.03%  -1.36%
 Croatian                   7.4150  7.4165   +0.02   1.89%
 kuna                                            %  
 Serbian                    119.52  119.52   +0.00   3.20%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1023.3  1025.3  -0.20%   +11.0
                                 6       6              4%
 Budapest                   37780.  37736.   +0.12   +18.0
                                04      10       %      5%
 Warsaw                     2514.3  2517.4  -0.12%   +29.0
                                 9       5              8%
 Bucharest                  8031.1  8057.5  -0.33%   +13.3
                                 2       8              5%
 Ljubljana                  816.26  823.21  -0.84%   +13.7
                                                        5%
 Zagreb                     1887.0  1892.0  -0.26%  -5.41%
                                 1       0          
 Belgrade                   725.20  724.74   +0.06   +1.09
                                                 %       %
 Sofia                      705.93  705.70   +0.03   +20.3
                                                 %      8%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                   -0.049  -0.022   +069b   -4bps
                                                ps  
   5-year                    0.125       0   +048b   -1bps
                                                ps  
   10-year                   0.937    0.04   +059b   +3bps
                                                ps  
 Poland                                                   
   2-year                   #VALUE       0  #VALUE   -2bps
                              !               !     
   5-year                    2.549  -0.005   +291b   -2bps
                                                ps  
   10-year                   3.227   0.005   +288b   -1bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.67    0.76    0.85       0
               IBOR=>                               
 Hungary               <BU    0.15    0.18    0.22    0.15
               BOR=>                                
 Poland                <WI   1.765     1.8   1.817    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 

 (Reporting by Sandor Peto; editing by John Stonestreet)
  
 
 

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