After a quiet week, central banks in the CEE region are in the market spotlight once again. Tomorrow we will see the National Bank of Hungary meeting,
After a quiet week, central banks in the CEE region are in the market spotlight once again. Tomorrow we will see the National Bank of Hungary meeting, where we expect rates to be unchanged at 6.50%. While inflation fell more than expected in March and the economy surprised on the downside, we think it is too early for forward guidance to change, given the resurgence of inflation in the second half of the year in our forecast.
The flash GDP numbers for the first quarter of the year for the Czech Republic and Hungary will be released on Wednesday. We should see further economic recovery in the Czech Republic, with a few upside surprises in the monthly data likely beating the Czech National Bank’s GDP forecast. In Hungary, on the other hand, the first quarter should be similar to last year’s weak final quarter.
The main focus on Thursday will be April inflation in Poland, which should fall further from 4.9% to 4.2% YoY, only slightly below market expectations. Some members of the Monetary Council have recently mentioned focusing on the April number, which should determine the size of the National Bank of Poland’s rate cut at the May meeting next week. We think lower inflation alongside weaker economic data will drive the central bank’s discussion to 50bp for the start of the cutting cycle.
PMIs across the region will be released on Friday. They’re expected to be lower overall, but as Germany’s data has indicated, the drop in sentiment shouldn’t be too dramatic.
Beyond the calendar in the Czech Republic, the Czech National Bank’s blackout period begins on Wednesday. Today and tomorrow, we are likely to see the main portion of the usual interviews with board members, including tomorrow’s conference, where the central bank’s governor will speak. For now, statements have been rather cautious, indicating that the CNB’s next decision is not a done deal. This kind of tone should seem hawkish given the markedly dovish market pricing.
CEE currencies saw some gains against the euro last week, and sentiment supports a continuation of the trend. We continue to find the Czech koruna the most attractive, which should be supported by a recovering economy and a hawkish central bank. We see a test of 24.900 in the coming days. On the other hand, EUR/PLN cannot go far from 4.280, and Wednesday’s inflation may trigger some upside pressure. The Hungarian forint could get some support from the hawkish National Bank of Hungary, but after last week’s gains, we see the current stronger levels as temporary.
Frantisek Taborsky
think.ing.com