May 15, 2019 / 4:13 PM / 4 months ago

CEE MARKETS-Forint falls despite robust CEE growth, central banks hold fire

    * GDP growth in CEE is higher than forecast
    * Wage surge fuels inflation, export outlook uncertain
    * Forint at lowest in seven months, bond yields fall
    * Polish, Romanian central banks keep rates on hold
    * Budapest stocks rebound

 (Adds Polish and Romanian central bank decisions and comments)
    By Sandor Peto and Luiza Ilie
    BUDAPEST, May 15 (Reuters) - The forint fell on Wednesday to
its weakest level against the euro since October after robust
first-quarter economic data from Central Europe failed to ease
concerns over inflation in the region and growth in Europe.
    The Romanian and the Polish central banks kept their
interest rates on hold at their respective policy meetings on
Wednesday.
    Meanwhile, figures out on Wednesday from the Czech Republic,
Hungary, Poland, Romania and Slovakia showed gross domestic
product (GDP) growing faster than expected on an annual basis.
    However the forint touched a seven-month low of
325.8 against the euro before recovering to 324.87 by late
trade, still weaker by 0.1%.
    Hungary's growth picked up to 5.3%, its fastest rate in 15
years. But the news coincided with a confirmation
from German car maker Daimler that it had postponed
further expansion of a Hungarian plant.
    "While these (GDP data) releases (in Central Europe) were
bullish, trade tensions loom large as a near-term risk," Morgan
Stanley analyst Pasquale Diana said in a note.    
    
    "Also, recent announcements on auto FDI (Hungary) highlight
more structural challenges for the region," Diana added.
    Domestic demand remains the key to economic growth in
Central Europe, while a slowdown in the euro zone, the region's
key export market, is causing concern, as does the threat of
U.S. tariffs on European car imports.
    The Hungarian central bank (NBH) is unlikely to tighten
policy at its meeting later this month since GDP growth may slow
and the bank expects a retreat in inflation late this year,
market participants said.     
    
    INFLATION
    While Hungary's inflation is near the NBH's 2-4% target
range, Poland's inflation is well within the 1.5-3.5% goal.
    There is no need to change Polish interest rates until the
end of the Monetary Policy Council's term in 2022, governor Adam
Glapinski said after an MPC meeting on Wednesday.
    The zloty, which touched a 10-week low against the euro in
early trade, rebounded later, to trade at 4.3025, firmer by 0.1%
from Tuesday, as the central bank's comments caused no surprise.
    Polish government bond yields fell in tandem with their
Hungarian peers, tracking Bunds. Hungary's 10-year yield was
fixed at 3.13%, dropping 4 basis points to its
lowest level in 5 weeks.
    The leu eased slightly to 4.7615 versus the euro,
even though Romanian central bank Governor Mugur Isarescu said
policymakers would continue to use market liquidity operations
to tighten monetary policy.
    Regional equities gained, tracking a rebound in Asia caused
by hopes that the United States and China will resolve their
trade dispute. Leading the way was a 0.9% rise for Budapest's
bluechip index, which had hit a three-month low in Tuesday's
session.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1651 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7350   25.7460    +0.04%    -0.11%
 crown      >                                       
 Hungary    <EURHUF=  324.8700  324.4500    -0.13%    -1.17%
 forint     >                                       
 Polish     <EURPLN=    4.3035    4.3086    +0.12%    -0.32%
 zloty      >                                       
 Romanian   <EURRON=    4.7615    4.7600    -0.03%    -2.26%
 leu        >                                       
 Croatian   <EURHRK=    7.4230    7.4125    -0.14%    -0.18%
 kuna       >                                       
 Serbian    <EURRSD=  117.9800  117.9000    -0.07%    +0.27%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1052.07  1050.310    +0.17%    +6.64%
                                       0            
 Budapest             40428.29  40084.64    +0.86%    +3.29%
 Warsaw                2174.26   2163.94    +0.48%    -4.50%
 Bucharest             8174.16   8135.82    +0.47%   +10.71%
 Ljubljana  <.SBITOP    863.47    863.12    +0.04%    +7.36%
            >                                       
 Zagreb                1837.12   1840.89    -0.20%    +5.05%
 Belgrade   <.BELEX1    733.01    735.08    -0.28%    -3.77%
            5>                                      
 Sofia                  566.36    563.42    +0.52%    -4.73%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6140   -0.1470   +228bps    -12bps
            R>                                      
   5-year   <CZ5YT=R    1.6870   -0.0210   +220bps     +1bps
            R>                                      
   10-year  <CZ10YT=    1.8610    0.0020   +196bps     +3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6560   -0.0410   +232bps     -2bps
            R>                                      
   5-year   <PL5YT=R    2.2220   -0.0040   +274bps     +2bps
            R>                                      
   10-year  <PL10YT=    2.8500   -0.0160   +295bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.22      2.22      2.19      2.20
            <PRIBOR=                                
            >                                       
 Hungary                  0.34      0.50      0.68      0.16
                                                    
 Poland                   1.74      1.75      1.76      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    

    
 (Reporting by Sandor Peto, editing by Larry King)
  
 
 
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