February 13, 2019 / 3:03 PM / 5 months ago

CEE MARKETS-Crown leads fx rise as Czechs add to upside CPI surprises

    * Crown firms after Jan CPI comes in at 2.5 pct vs 2.2 pct
fcast
    * Core inflation rise continues to buoy the forint
    * Zloty steady after higher-than-expected C/A deficit

 (Adds Czech central bank and analyst comments, Polish data)
    By Sandor Peto and Jason Hovet
    BUDAPEST/PRAGUE, Feb 13 (Reuters) - The crown led Central
European currencies higher on Wednesday after Czech annual
inflation came in well above forecasts, adding to upside
surprises in consumer price indexes the region.
    Czech annual inflation jumped to 2.5 percent in January from
two percent in December, well above a 2.2 percent forecast, and
analysts said a rise in energy bills early this year could
maintain upside inflation pressure. 
    The Czech central bank (CNB) said the figure, pushed above
its forecast by higher core inflation and an early pick-up in
food prices, represented a risk of higher inflation going
forward. 
    The Czech crown firmed by 0.2 percent against the
euro to 25.81, while the forint and the leu
gained 0.1 percent.
    The units ignored a firming of the dollar which in
the past year often caused currency selling in emerging markets,
and a warning from CNB Vice-Governor Tomas Nidetzky that the
Czech economy would get a hit if Britain were to leave the
European Union without a deal. 
    But the crown remained weaker than the 25.6 average rate
projected by the CNB for the first quarter.
    The bank kept interest rates on hold at its meeting last
week, remaining open to further hikes. CNB Governor Jiri Rusnok
said after the decision that a rate hike would not have
certainly strengthened the crown.
    Czech government bond yields rose after the inflation data.
    The 10-year yield rose by four basis points to
1.72 percent, compared with a six basis point drop in the
corresponding Hungarian yield to 2.69 percent.
    "We continue to forecast one interest rate hike this year in
Q3, but today's print skews the risks to our forecast towards
earlier and potentially more rate hikes," Goldman Sachs analysts
Kevin Daly and Timon Dreyer said in a note.  
    "While Czech rates have risen at the front end by close to
10bp today, the market is still pricing in less than a full rate
hike for this year and close to a full rate cut for next year,"
they said, adding that market-implied rates remained too low.
    Elsewhere, the forint got a boost already on Tuesday, after
Hungary's tax-adjusted annual core inflation reached 3 percent,
the threshold that central bank deputy governor Marton Nagy said
last month would be a signal that the bank needs to start
monetary tightening.
    Romanian figures released on Wednesday showed that annual
inflation was flat at 3.3 percent.
    That was a tad above analysts' expectations, but it is
unlikely to trigger action from the Romanian central bank which
is deeply engaged in a row with the government over a new tax on
banks' assets tied to interbank interest rates.
    The zloty was steady after December Polish data
showed a higher-than-expected 1.4 billion euro current account
deficit. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1501 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.8100   25.8670    +0.22%    -0.40%
 crown      >                                       
 Hungary    <EURHUF=  318.2200  318.5500    +0.10%    +0.90%
 forint     >                                       
 Polish     <EURPLN=    4.3300    4.3295    -0.01%    -0.93%
 zloty      >                                       
 Romanian   <EURRON=    4.7425    4.7481    +0.12%    -1.87%
 leu        >                                       
 Croatian   <EURHRK=    7.4031    7.4075    +0.06%    +0.09%
 kuna       >                                       
 Serbian    <EURRSD=  118.0400  118.1200    +0.07%    +0.22%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1061.41  1057.320    +0.39%    +7.59%
                                       0            
 Budapest             40150.77  40488.09    -0.83%    +2.59%
 Warsaw                2347.90   2370.99    -0.97%    +3.13%
 Bucharest             7616.83   7523.83    +1.24%    +3.16%
 Ljubljana  <.SBITOP    831.34    833.24    -0.23%    +3.37%
            >                                       
 Zagreb                1754.45   1750.00    +0.25%    +0.32%
 Belgrade   <.BELEX1    702.19    707.54    -0.76%    -7.81%
            5>                                      
 Sofia                  573.22    573.32    -0.02%    -3.57%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.8270    0.0790   +238bps     +7bps
            R>                                      
   5-year   <CZ5YT=R    1.6790    0.0770   +204bps     +7bps
            R>                                      
   10-year  <CZ10YT=    1.7530    0.0430   +161bps     +3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5460   -0.1090   +210bps    -12bps
            R>                                      
   5-year   <PL5YT=R    2.1910    0.0010   +255bps     -1bps
            R>                                      
   10-year  <PL10YT=    2.7220   -0.0080   +258bps     -2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.08      2.11      2.13      1.99
            <PRIBOR=                                
            >                                       
 Hungary                  0.38      0.59      0.80      0.15
                                                    
 Poland                   1.74      1.73      1.73      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto; Editing by Andrew Cawthorne, William
Maclean)
  
 
 
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