November 13, 2018 / 3:15 PM / 6 months ago

CEE MARKETS-Forint eases on caution over Italy-EU dispute, GDP

    * Markets cautious amid risks including Italy-EU dispute
    * Q3 GDP seen slowing
    * Markets seek direction after 3-day losing streak 

 (Recasts with new comments and background)
    By Sandor Peto
    BUDAPEST, Nov 13 (Reuters) - The forint eased on Tuesday
with investors in Central Europe cautious ahead of the release
of third-quarter economic output figures in the region and in
the euro zone.
    The euro, the region's closely watched reference
currency, held close to its lowest level since mid-2017, as
Italy faced a deadline from the European Union (EU) to cut its
budget deficit target.
    Central European currencies were mixed, with the forint
 and the leu easing 0.1 percent against the
euro by 1405 GMT, while the zloty firmed 0.1 percent.
    Investors in the region's currency and stock markets waited
for clear signs of market direction after three sessions of
retreat that followed two weeks of gains, market participants
    Regional currencies may face additional pressure if Italy
does not cut its deficit goal and disagreements with Brussels
lead to further euro weakness, traders said.
    Bearish prospects for the euro, due to technical
factors and worries over Italy, support a bullish view for the
dollar versus Central European currencies, which may also weaken
against the euro, Rabobank analyst Piotr Matys said in a note.
    Britain's exit from the European Union, which is also often
mentioned as a risk factor, is unlikely to seriously affect the
region's robustly growing economies, said Brett Diment, head of
emerging debt at Aberdeen Standard Investments.
    "The only relevance is if it impacts the euro," he said.
    Analysts expect preliminary third-quarter economic output
data due on Wednesday to slow. Poland's annual growth is seen
declining to 4.7 percent from 5.1 percent in the second quarter,
a still robust rate.
    Slowing growth in the euro zone, the region's main trade
partner, is also a risk, market participants said. Analysts
expect Wednesday's euro zone figures to show a steady 1.7
percent annual economic growth.
    "If GDP in the euro zone will be close to the consensus, I
don't see any influence on the zloty," said Marcin Turkiewicz,
currency dealer at mBank.
    In the region's currency markets, the forint led losses,
after outperforming regional peers in the past weeks, while the
crown firmed a shade.
    The crown has outperformed the forint and the zloty this
year thanks to the Czech central bank's (CNB) gradual tightening
of policy since August last year.
    But the euro's wobbles, coupled with dollar buying, have
rendered the CNB's hikes in the past few months ineffective in
further boosting the crown against its regional peers, even
though the Polish and Hungarian central banks have kept their
own rates at record lows.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1505 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9480   25.9540    +0.02%    -1.56%
 crown      >                                       
 Hungary    <EURHUF=  322.6400  322.2000    -0.14%    -3.63%
 forint     >                                       
 Polish     <EURPLN=    4.2960    4.2997    +0.09%    -2.79%
 zloty      >                                       
 Romanian   <EURRON=    4.6615    4.6570    -0.10%    +0.39%
 leu        >                                       
 Croatian   <EURHRK=    7.4225    7.4255    +0.04%    +0.11%
 kuna       >                                       
 Serbian    <EURRSD=  118.2400  118.2700    +0.03%    +0.22%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1080.48  1081.760    -0.12%    +0.22%
 Budapest             38323.91  38108.46    +0.57%    -2.68%
 Bucharest             8628.76   8661.23    -0.37%   +11.29%
 Ljubljana  <.SBITOP    811.73    817.69    -0.73%    +0.66%
 Zagreb                1758.24   1767.66    -0.53%    -4.59%
 Belgrade   <.BELEX1    749.30    744.56    +0.64%    -1.38%
 Sofia                  595.30    596.08    -0.13%   -12.13%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.4870    0.0070   +213bps     +1bps
   5-year   <CZ5YT=R    1.8490    0.0390   +204bps     +3bps
   10-year  <CZ10YT=    2.1240    0.0240   +173bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.05      2.20      2.35      1.99
 Hungary                  0.38      0.67      1.03      0.15
 Note: FRA  are for ask prices                              

 (Additional reporting by Karin Strohecker in London and Alicja
Ptak in Warsaw; Editing by Mark Potter and Kirsten Donovan)
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