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CEE MARKETS-Zloty eases, Polish central bank seen keeping loose policy
July 5, 2017 / 9:15 AM / a month ago

CEE MARKETS-Zloty eases, Polish central bank seen keeping loose policy

    * Polish central bank is seen holding rates until Q4 2018
    * Zloty eases 0.2 pct/euro, still up almost 4 pct this year
    * Polish bank is expected to keep loose policy stance

    By Sandor Peto and Bartosz Chmielewski
    BUDAPEST/WARSAW, July 5 (Reuters) - The zloty
eased against the euro on Wednesday ahead of the Polish central
bank's meeting which could underpin expectations for a delay in
rate tightening to late 2018.
    The currency shed 0.2 percent by 0816 GMT.
    Some other Central European currencies like the leu also
eased, but less than the zloty, while the forint was
steady after Hungary published May retail sales data showing a
robust 5.4 percent annual growth.
    Growth in the region's economies has been picking up this
year due to a surge in wages, healthy demand from Western
European export markets and faster inflows of funding from the
European Union.
    But inflation has been relatively subdued after a pick-up
since last year, and in the region only the Czech central bank
has shifted to a hawkish rhetoric.
    Analysts' forecasts for the Polish central bank's first rate
hike shifted in the past two months to the last quarter of 2018
from the second quarter, according to Reuters polls.

    The shift, caused by signals from the bank that tightening
is in the distant future, was accompanied by a retreat of the
zloty from its strongest levels since the summer of
2015, but it has still gained almost 4 percent since December.
    Dovish signals from the bank and continuing monetary policy
tightening elsewhere in the world may weigh on the zloty in the
near future, Pekao bank analysts said in a note.   
    The bank's new economic forecasts and its news conference,
due at 1400 GMT, will be closely watched, but any significant
change in its stance is unlikely, analysts said.
    "The MPC (Monetary Policy Council) will get an update of the
projection, most likely with higher path of GDP, but with CPI
still staying below the 2.5 percent target by the end of 2019,"
BZ WBK analysts said in a note.
    "We think the revised CPI path will not include lower (than
expected) June reading (at 1.5 percent year-on-year) so the
central bank's forecasts could be too high," they added.
    Polish government bond prices were treading water, with mild
weakening bias, after gains in the past week, with the yield on
the 10-year benchmark paper trading at 3.2895 percent.
    The zloty could get support from strong economic
fundamentals and recurring speculation for central bank rate
hikes if upcoming inflation figures are higher, Raiffeisen
analsts said in a note.
    That, and low primary supply could also support Polish
government bonds, they added.
                CEE MARKETS  SNAPSH   AT  1016 CET         
                             Latest  Previo  Daily   Change
                             bid     close   change  in
 Czech crown                 26.150  26.131  -0.07%   3.28%
                                  0       0          
 Hungary                     308.05  308.04   +0.00   0.25%
 forint                          00      00       %  
 Polish zloty                4.2475  4.2405  -0.16%   3.68%
 Romanian leu                4.5885  4.5845  -0.09%  -1.17%
 Croatian kuna               7.4130  7.4105  -0.03%   1.92%
 Serbian dinar               120.54  120.82   +0.23   2.33%
                                 00      00       %  
 Note: daily    calculated   previo  close   1800          
 change         from         us      at      CET     
                             Latest  Previo  Daily   Change
                                     close   change  in
 Budapest                    34937.  34889.   +0.14   +9.17
                                 54      56       %       %
 Warsaw                      2301.9  2294.2   +0.33   +18.1
                                  4       7       %      7%
 Bucharest                   8031.7  7928.6   +1.30   +13.3
                                  8       7       %      6%
 Ljubljana                   793.72  792.85   +0.11   +10.6
                                                  %      1%
 Zagreb                      1866.1  1866.8  -0.04%  -6.45%
                                  2       2          
 Belgrade                    713.40  713.05   +0.05  -0.55%
 Sofia                       712.54  711.44   +0.15   +21.5
                                                  %      0%
                             Yield   Yield   Spread  Daily
                             (bid)   change  vs      change
                                             Bund    in
   2-year                    #VALUE  -0.174  #VALUE  -18bps
                               !               !     
   5-year                    #VALUE   0.011  #VALUE   +0bps
                               !               !     
   10-year                   #VALUE   0.021  #VALUE   +1bps
                               !               !     
                FORWARD      RATE    AGREEMENT             
                             3x6     6x9     9x12    3M
 Hungary                <BU   0.195   0.225    0.27    0.15
 Poland                 <WI   1.749   1.768    1.82    1.73
 Note: FRA      are for ask                                
 quotes         prices                               
 (Writing by Sandor Peto; Editing by Toby Chopra)

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