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CEE MARKETS-Zloty firms, Polish central bank may signal CPI worry
November 8, 2017 / 9:55 AM / 17 days ago

CEE MARKETS-Zloty firms, Polish central bank may signal CPI worry

    * Polish central bank is seen keeping rates on hold
    * Forecasts may show CPI worries, zloty firms slightly
    * Leu regains some ground after plunge
    * Regional labour markets are tight

    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Nov 8 (Reuters) - The zloty firmed
slightly on Wednesday as the Polish central bank (NBP) started a
meeting which may be followed by comments showing increasing
worries over inflation.
    All 14 analysts in a Reuters poll last week projected that
the bank will keep its record-low 1.5 percent key rate on hold.
    According to the median forecast in the poll, the next
likely move is a 25 basis point hike in the fourth quarter of
2018.
    Any signal from the bank, which will also publish new
economic forecasts, that it is worried about inflation could be
interpreted as a sign that a rate hike may come earlier than
expected, market participants said.
    "We reiterate our projection of additional zloty
appreciation potential towards EUR/PLN 4.20 until year-end,"
Raiffeisen analyst Wolfgang Ernst said in a note.
    The zloty firmed 0.1 percent to 4.2406 against the
euro by 0855 GMT.
    Expectations for interest rate rises have also helped bank
stocks listed in Warsaw.
    Their index and the bourse's bluechip index
steadied, after hitting multi-year highs on Tuesday.
    A rebound in inflation in the past year have nudged some
central bankers in the Eastern wing of the European Union
towards more hawkish bias.
    The Czech central bank has lifted its key interest rates
twice since August, and the crown trades near
four-year highs against the euro.
    Romania's central bank said on Tuesday that it was moving
towards a full-fledged inflation targeting, focusing on keeping
market interest rates closer to its benchmark rate.
    The leu plunged to its weakest levels in more than
five years after the comments because governor Mugur Isarescu
signalled more flexibility on the exchange rate.
    On Wednesday, the currency regained some ground, trading at
4.6295 against the euro.
    A decline in the ratio of foreign currency lending in
Romania makes a weaker leu less painful.
    But the euro continues to play an important role in the
economy, and any downward leu adjustment is likely to be gradual
and controlled, ING Romania chief economist Ciprian Dascalu
said.
    A likely surge in government leu spending late this year
maintains uncertainty in markets, and the government meets on
Wednesday to discuss a controversial tax overhaul plan.
    Romania has led a regional surge in wages and economic
output, and the expected inflation and budget impacts have
triggered worries.
    Regional labour markets are very tight, mainly due to a flow
of workers into richer Western countries. 
    Czech figures released on Wednesday showed a drop in the
unemployment rate to 3.5 percent, the EU's lowest level, in
October. Poland's jobless rate fell to a record low of 6.6
percent, Labour Minister Elzbieta Rafalska said.   
    
               CEE MARKETS  SNAPSH   AT  0955 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.555  25.561   +0.02   5.68%
                                 0       0       %  
 Hungary                    311.80  311.58  -0.07%  -0.96%
 forint                         00      00          
 Polish zloty               4.2406  4.2457   +0.12   3.85%
                                                 %  
 Romanian leu               4.6295  4.6316   +0.05  -2.04%
                                                 %  
 Croatian                   7.5404  7.5410   +0.01   0.19%
 kuna                                            %  
 Serbian                    118.76  118.76   +0.00   3.86%
 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                     1057.0  1055.7   +0.12   +14.6
                                 4       3       %      9%
 Budapest                   39732.  39809.  -0.19%   +24.1
                                27      00              5%
 Warsaw                     2537.0  2536.3   +0.03   +30.2
                                 3       7       %      4%
 Bucharest                  7766.9  7747.6   +0.25   +9.62
                                 4       9       %       %
 Ljubljana                  786.09  784.85   +0.16   +9.55
                                                 %       %
 Zagreb                     1816.4  1816.5  -0.01%  -8.94%
                                 3       7          
 Belgrade                   730.05  729.68   +0.05   +1.77
                                                 %       %
 Sofia                      675.14  674.34   +0.12   +15.1
                                                 %      3%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.377   0.079   +114b   +8bps
                                                ps  
   5-year                    0.746   0.045   +112b   +4bps
                                                ps  
   10-year                   1.563  -0.035   +124b   -4bps
                                                ps  
 Poland                                                   
   2-year                    1.615       0   +238b   +0bps
                                                ps  
   5-year                    2.653   0.002   +303b   +0bps
                                                ps  
   10-year                   3.413   0.003   +309b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.89    0.99    1.11       0
               IBOR=>                               
 Hungary               <BU    0.03   0.085   0.115    0.03
               BOR=>                                
 Poland                <WI    1.78    1.83    1.93    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
 *****
 
 (Reporting by Sandor Peto; Editing by Raissa Kasolowsky)
  
 
 

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