November 15, 2018 / 11:00 AM / a year ago

CEE MARKETS-Currencies hand back gains as UK Brexit minister quits

    * CEE currencies continue to track euro/dollar
    * Resignation of Brexit minister reverses early FX gains
    * Investors digest robust GDP data, coupled with CPI rise

    By Sandor Peto
    BUDAPEST, Nov 15 (Reuters) - Central European currencies
gave up most of their early gains on Thursday after Dominic
Raab, the British minister responsible for talks about quitting
the European Union (Brexit), resigned.
    Brexit talks are being closely watched as Britain is an
important trade partner, where hundreds of thousands of workers
from the region live, who send home part of their earnings.
    The developments in the talks have often influenced the
region's currencies indirectly, via their impact on the euro's
exchange rate against the U.S. dollar.
    They have tracked a rebound of the euro since Monday, as
worries over political support in Britain for Prime Minister
Theresa May's Brexit plan eased, but gave up some ground after
Raab resigned.
    After an early 0.2 percent rise versus the euro, the forint
 and the zloty were almost flat at 0939 GMT,
at 322.58 and 4.2969, respectively.
    One Budapest-based dealer said the forint may get additional
support in the next days from some expectations the Hungarian
central bank may provide a signal after its meeting next Tuesday
about future monetary tightening.
    Data on Wednesday showed output growth in the region
remained more robust than expected, even though a slowdown next
year tracking European trade partners appears likely, while
inflationary pressures continue in most of the region.
    "(This) may stir up the debate about appropriateness of
monetary and/or fiscal policies going forward," Raiffeisen
analyst Gintaras Shlizhyus said in a note.
    Britain's exit from the EU, which will cut funding from the
EU to poorer Central Europe, is unlikely to hit economic growth,
ING analysts said in a note dated Nov. 12.
    "In spite of Brexit, we expect growth in Central Europe to
soften rather than slow sharply from the above-trend readings
posted earlier this year," they said.
    The Czech crown a recent regional underperformer,
retained part of its early gains, trading up 0.1 percent at 26
against the euro, still near 4-month new lows set at 26.03 on
    The Czech coalition government faces a crisis due to a news
report that Prime Minister Andrej Babis's son might have been
taken out of the country to hinder investigations into an
alleged fraud case involving the prime minister. Babis has
denied any wrongdoing.
    The region's markets, particularly in the Czech Republic,
rarely react to domestic political developments.
    Mixed company earnings reports, combined with shaky
sentiment in European markets, put Central European equities
indices on a rollercoaster.
    Shares in Romania's Transgaz shed 1.6 percent,
after the state-owned gas pipeline operator reported a fall in
its nine-month profits. 
            CEE       SNAPSHOT   AT                         
            MARKETS             1039 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   26.0000   26.0280    +0.11%    -1.76%
 crown      >                                       
 Hungary    <EURHUF=  322.5800  322.6100    +0.01%    -3.62%
 forint     >                                       
 Polish     <EURPLN=    4.2969    4.2985    +0.04%    -2.81%
 zloty      >                                       
 Romanian   <EURRON=    4.6615    4.6615    +0.00%    +0.39%
 leu        >                                       
 Croatian   <EURHRK=    7.4200    7.4223    +0.03%    +0.14%
 kuna       >                                       
 Serbian    <EURRSD=  118.1500  118.1900    +0.03%    +0.30%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1082.18  1084.440    -0.21%    +0.37%
 Budapest             39057.15  39115.56    -0.15%    -0.81%
 Warsaw                2237.77   2231.90    +0.26%    -9.08%
 Bucharest             8526.68   8550.55    -0.28%    +9.97%
 Ljubljana  <.SBITOP    810.82    809.64    +0.15%    +0.55%
 Zagreb                1747.10   1748.59    -0.09%    -5.20%
 Belgrade   <.BELEX1    753.72    748.76    +0.66%    -0.80%
 Sofia                  594.41    594.78    -0.06%   -12.26%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.4900    0.0060   +215bps     +3bps
   5-year   <CZ5YT=R    1.8190    0.0020   +206bps     +5bps
   10-year  <CZ10YT=    2.1040    0.0040   +175bps     +5bps
   2-year   <PL2YT=R    1.5970   -0.0200   +226bps     +1bps
   5-year   <PL5YT=R    2.4830    0.0020   +272bps     +5bps
   10-year  <PL10YT=    3.2620    0.0140   +290bps     +6bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.05      2.20      2.35      1.99
 Hungary                  0.35      0.63      0.99      0.15
 Poland                   1.77      1.81      1.88      1.72
 Note: FRA  are for ask prices                              
 (Reporting by Sandor Peto; Editing by Mark Potter)
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