July 4, 2019 / 8:17 AM / 4 months ago

CEE MARKETS-Currencies steady, Romanian central bank meeting eyed

    By Krisztina  Than
    BUDAPEST, July 4 (Reuters) - Central European currencies
were steady on Thursday while stock markets were seeking
direction, with Budapest shares opening a shade higher after
Wall Street hit record highs on Wednesday.
    Romania's central bank will hold a meeting later in the day
where it is expected to keep interest rates on hold, similar to
the Polish central bank which held rates on Wednesday despite a
rise in inflation.
    Growth and inflation have crept higher in several eastern
European economies. However, the easing bias in core markets has
allowed its central banks to avoid rate hikes, analysts have
said. Polish, Czech and Hungarian central banks are all expected
to keep rates flat this year.
    The central banks in Central Europe have adopted a
wait-and-see stance as there are growing expectations that a
slowdown in the euro zone and lower than expected price growth
there would also dampen inflation in Central Europe via lower
import prices.
    "Despite the revival of core inflation, the (Polish) MPC
maintains a high bar for action, in our view," Morgan Stanley
said in a note. 
    "Even if inflation continued to surprise on the upside, we
think the NBP would downplay this on the grounds of expected
moderation in the medium term."
    ​The Polish central bank kept rates on hold on Wednesday and
increased its CPI and GDP growth forecasts for 2019 and 2020 and
reiterated that there may be no need to change rates until 2022.

    The Polish zloty was flat versus the euro at 0822
GMT, and so was the Hungarian forint.
    "We expect increased volatility in the core markets
tomorrow, when the data from the US labour market will be
available. These will be important in shaping market
expectations ahead of the July Fed meeting," Bank Millennium
said in a note. 
    In Romania, the central bank hiked its main rate to 2.50% in
May 2018 and has since tightened monetary policy by controlling
money market liquidity, which it said gave it more flexibility.
    Inflation is expected to remain above the bank's 1.5-3.5%
target this year. Economic growth is set to slow, while fiscal
and current account deficits are rising, fuelled by
consumption-friendly public sector wage hikes.
    Romanian central bank Governor Mugur Isarescu will hold a
briefing at 1200 GMT after the rate decision.
            CEE        SNAPSHO   AT                            
            MARKETS    T        1022              
                       Latest   Previou  Daily    Change
                       bid      close    change   in 2019
 Czech                  25.440  25.4590    n/a         n/a
 Hungary               322.400  322.550   +0.05%         -0.41%
 forint                      0        0           
 Polish                 4.2393   4.2420   +0.06%         +1.19%
 Romanian               4.7250   4.7240   -0.02%         -1.50%
 Croatian               7.3950   7.3973   +0.03%         +0.20%
 Serbian               117.720  117.800   +0.07%         +0.49%
 dinar                       0        0           
 Note:      calculated from              1800                  
 daily                                   CET      
                       Latest   Previou  Daily    Change
                                close    change   in 2019
 Prague                1049.04  1049.29   -0.02%         +6.33%
 Budapest              41106.6  40985.1   +0.30%         +5.03%
                             6        8           
 Warsaw                2345.53  2345.56   -0.00%         +3.03%
 Bucharest             8860.80  8845.25   +0.18%        +20.01%
 Ljubljana              880.89   880.89   +0.00%         +9.53%
 Zagreb                1879.00  1879.00   +0.00%         +7.44%
 Belgrade   <.BELEX15   741.88   741.88   +0.00%         -2.60%
 Sofia                  581.48   581.48   +0.00%         -2.18%
                       Yield    Yield    Spread   Daily
                       (bid)    change   vs Bund  change in
 Czech                                            spread
   2-year   <CZ2YT=RR   1.5190   0.0370   +227bp          +3bps
            >                                  s  
   5-year   <CZ5YT=RR   1.3500   0.0340   +204bp          +4bps
            >                                  s  
   10-year  <CZ10YT=R   1.4890  -0.0050   +188bp          +0bps
            R>                                 s  
   2-year   <PL2YT=RR   1.5840  -0.0050   +233bp          -1bps
            >                                  s  
   5-year   <PL5YT=RR   1.9000  -0.0020   +259bp          +0bps
            >                                  s  
   10-year  <PL10YT=R   2.3170   0.0060   +271bp          +1bps
            R>                                 s  
            FORWARD    RATE     AGREEME                        
                       3x6      6x9      9x12     3M interbank
 Czech Rep          <     2.17     2.10     2.00           2.17
 Hungary            <     0.34     0.45     0.56           0.25
 Poland             <     1.75     1.72     1.72           1.72
 Note: FRA  are for ask prices                                 
 (Reporting by Krisztina Than; Editing by Toby Chopra)
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