October 10, 2019 / 9:49 AM / 13 days ago

CEE MARKETS-Czech crown drops with CPI surprise, Romanian leu steady before no-confidence vote

    PRAGUE, Oct 10 (Reuters) - The Czech crown eased on Thursday
after consumer prices dropped the most on a monthly basis in 13
years, taking some pressure off the Czech National Bank to
consider tightening its policy.
    In Romania, the leu was steady before a
parliamentary no-confidence vote in which the centrist
opposition is seeking to topple the Social Democrat government,
one year before a general election.
    Other currencies also hung in recent ranges, with the
Hungarian forint gaining 0.2% to 333.50 to the euro
and Poland's zloty was flat at 4.321.
    The crown was the biggest mover, losing 0.2% to
25.855 to the euro by 0932 GMT after data showed prices dropped
0.6% month-on-month in September, pulling the headline
year-on-year rate down to 2.7% and away from the upper end of
the central bank's preferred range around its 2% target.

    With central Europe's economies still on solid ground, and
having not yet felt the full impact of a slowdown in Germany and
the euro zone, central Europe's rate setters have largely
shifted into wait-and-see mode on rates even as the European
Central Bank eases policy.
    The Czechs, though, have kept open a rate hike debate and
the Czech National Bank board voted 5-2 on Sept. 25 to maintain
the base rate at 2.00%.
    The two dissenters pushed for a 25-basis-point increase and
Governor Jiri Rusnok said the debate would continue at the next
meeting in November.
    "The November policy meeting will not be easy due to the
data development and the new staff outlook (due)," Michal
Brozka, economist at Komercni Banka, said. 
    "We still lean towards the worsening external situation and
risk perception prevailing over faster inflation and the
inflationary effect of domestic demand. We continue to expect
rate stability through the whole of next year."
    The leu bid down just a touch at 4.751 to the euro
just before Thursday's no-confidence vote. It has largely
shrugged off politics. 
    Prime Minister Viorica Dancila's cabinet lost its majority
in August after a coalition junior ally, ALDE, quit over policy
disagreements, leaving her vulnerable to a censure motion. 
    "The uncertainty in (the) political governing solution will
be extended to the coming months given a lack of parliamentary
majority, with negative implications for fiscal policy too,"
Raiffeisen analysts said in a note.
    "The political crisis may reflect negatively on financial
markets, though the magnitude of such reaction may be limited
taking past examples of political crises into account."
                                CEE MARKETS        SNAPSHOT    AT                        
                                                                 1132 CET                
                                                   Latest      Previous        Daily     Change
                                                   bid         close           change    in 2019
 EURCZK=    Czech crown                            25.8550     25.8005         -0.21%    -0.57%
 EURHUF=    Hungary forint                         333.5000    334.3150        +0.24%    -3.72%
 EURPLN=    Polish zloty                           4.3213      4.3215          +0.00%    -0.73%
 EURRON=    Romanian leu                           4.7510      4.7500          -0.02%    -2.04%
 EURHRK=    Croatian kuna                          7.4265      7.4270          +0.01%    -0.22%
 EURRSD=    Serbian dinar                          117.4900    117.4600        -0.03%    +0.69%
            Note: daily change  calculated from                                1800 CET  
                                                   Latest      Previous        Daily     Change
                                                               close           change    in 2019
 .PX        Prague                                 997.18      996.6200        +0.06%    +1.08%
 .BUX       Budapest                               39531.21    39544.62        -0.03%    +1.00%
 .WIG20     Warsaw                                 2114.94     2134.37         -0.91%    -7.10%
 .BETI      Bucharest                              9469.99     9514.48         -0.47%    +28.26%
 .SBITOP    Ljubljana                              871.47      864.92          +0.76%    +8.36%
 .CRBEX     Zagreb                                 1933.22     1929.28         +0.20%    +10.54%
 .BELEX15   Belgrade                               747.56      747.93          -0.05%    -1.86%
 .SOFIX     Sofia                                  557.99      559.26          -0.23%    -6.13%
                                                   Yield       Yield           Spread    Daily
                                                   (bid)       change          vs Bund   change in
            Czech Republic                                                               spread
 CZ2YT=RR   2-year                                 1.2540      -0.0110         +198bps   -2bps
 CZ5YT=RR   5-year                                 1.0080      -0.0510         +177bps   -8bps
 CZ10YT=RR  10-year                                1.1620      -0.0250         +170bps   -5bps
 PL2YT=RR   2-year                                 1.5080      0.0050          +224bps   -1bps
 PL5YT=RR   5-year                                 1.6760      0.0110          +244bps   -1bps
 PL10YT=RR  10-year                                1.9080      0.0120          +244bps   -1bps
                                FORWARD            RATE        AGREEMENT                 
                                                   3x6         6x9             9x12      3M interbank
            Czech Rep                              2.22        2.17            2.06      2.17
            Hungary                                0.27        0.31            0.34      0.21
            Poland                                 1.73        1.72            1.67      1.72
            Note: FRA quotes    are for ask prices                                       

 (Reporting by Robert Muller and Jason Hovet in Prague and Luiza
Ilie and Timothy Heritage)
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