March 4, 2020 / 10:22 AM / a month ago

CEE MARKETS-Forint leads gains, Polish central bank meeting in focus

    By Anita Komuves
    BUDAPEST, March 4 (Reuters) - The Hungarian forint led
Central European currencies higher on Wednesday after an
emergency rate cut by the U.S. Federal Reserve aimed at easing
the economic fallout from the fast-spreading coronavirus.
    Regional currencies jumped late on Tuesday after the
surprise Fed rate cut weakened the dollar. Investors will eye
Poland, the largest economy in the region, where the central
bank holds a rate setting meeting later on Wednesday. Earlier in
the day, Poland reported its first case of coronavirus.  
    Following the Fed's move and signs from other central bank
policymakers that they are willing to take measures, markets are
keenly watching how Central European central banks will react to
the economic impacts from the coronavirus. It is still uncertain
how the supply-chain disruptions would impact the open economies
of Central Europe.
    Poland's central bank is expected to hold rates steady, but 
analysts are watching for the direction of a revision to
economic forecasts.   
    "The rise in inflation could take a backseat during
the NBP meeting on Wednesday as coronavirus concerns mount in
Europe," Morgan Stanley wrote in a note. 
    "Slowing growth was a point of discussion even before the
outbreak when the hawkish camp became more vocal, as expected.
The market is now pricing more than two cuts for 2020 which will
take the policy rate down to 1%," the note added.
    The forint strengthened to 335.05 to the euro, up
0.32% on the day, extending gains after sharp losses last month.
    The Czech crown was stable at 25.3300 to the euro
up while the Polish zloty was up 0.17% and traded at
4.297 to the euro.  
    Higher-than-expected inflation data had led to expectations
of rate hikes in the region recently, and the Czech central bank
unexpectedly raised its benchmark interest rate on Feb 6. News
of the coronavirus might put an end to expectations of policy
tightening, analysts said.
   "Today's rate meeting (of the NBP) will probably pass without
event as latest global economic developments mitigate against
rate hikes at this time, whatever the inflation situation might
appear to be" Tatha Ghose of Commerzbank wrote in a note.
    The Czech National Bank (CNB) does not plan any help for the
economy at the moment, Vice Governor Marek Mora was quoted as
saying by daily paper Lidove Noviny.
    "So far, we are in a state of evaluating the situation. We
don't prepare any specific steps at the moment. We have a space
for a possible lowering of rates," he said.
    The Czech central bank will hold its next rate-setting
meeting on March 26. It surprised markets in February by raising
its main two-week repo rate by 25 basis points to 2.25%.
               
    Stock markets were mixed, and seeking direction across the
region, with Budapest gaining 0.61% and Prague down
0.40%. Warsaw's main index was down 0.4% while
Bucharest was trading flat.
     A central bank deputy governor in Hungary said on Monday,
before the Fed rate cut, that it was hard to predict the
economic impact of the coronavirus in Hungary. 
    "Right now my view is that the coronavirus has no impact on
monetary policy," Mihaly Patai said.
    
            CEE        SNAPSHOT    AT                         
            MARKETS               1036 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   25.3300   25.3450    +0.06%    +0.40%
 crown                                                
 Hungary                335.0500  336.1300    +0.32%    -1.17%
 forint                                               
 Polish                   4.2976    4.3050    +0.17%    -0.96%
 zloty                                                
 Romanian                 4.8085    4.8063    -0.05%    -0.42%
 leu                                                  
 Croatian                 7.4815    7.4833    +0.02%    -0.48%
 kuna                                                 
 Serbian                117.4600  117.5900    +0.11%    +0.09%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                  1007.47  1011.530    -0.40%    -9.69%
                                         0            
 Budapest               43565.98  43301.39    +0.61%    -5.46%
 Warsaw                  1882.00   1889.67    -0.41%   -12.47%
 Bucharest               9701.18   9693.05    +0.08%    -2.77%
 Ljubljana                903.61    903.01    +0.07%    -2.40%
 Zagreb                  1860.49   1868.86    -0.45%    -7.78%
 Belgrade   <.BELEX15     784.78    788.87    -0.52%    -2.11%
            >                                         
 Sofia                    545.87    546.75    -0.16%    -3.92%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     1.6890    0.0280   +250bps     +2bps
            >                                         
   5-year   <CZ5YT=RR     1.4960    0.0470   +230bps     +4bps
            >                                         
   10-year  <CZ10YT=R     1.2180   -0.0470   +185bps     -6bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     1.2750   -0.0150   +209bps     -2bps
            >                                         
   5-year   <PL5YT=RR     1.3610   -0.0870   +217bps    -10bps
            >                                         
   10-year  <PL10YT=R     1.6490   -0.0810   +228bps    -10bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       1.97      1.58      1.44      2.37
            PRIBOR=>                                  
 Hungary            <       0.71      0.72      0.72      0.64
            BUBOR=>                                   
 Poland             <       1.45      1.19      1.07      1.70
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
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 (Additional reporting by Jason Hovet in Prague and Alan
Charlish in Warsaw; Editing by Kim Coghill)
  
 
 
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