September 10, 2019 / 9:12 AM / 5 months ago

CEE MARKETS-Hungarian forint slips after lower-than-expected CPI

    By Alan Charlish
    WARSAW, Sept 10 (Reuters) - The Hungarian forint softened on
Tuesday after a lower than expected inflation reading confirmed
the country's central bank can maintain its loose policy and
left investors to focus on likely monetary easing by the ECB
later this week.
    Hungary's headline inflation slowed to an
annual 3.1% in August, below analyst forecasts for 3.2%, after
hitting a seven-year-high of 3.9% in May. Czech consumer prices
rose 2.9% in August, remaining near the top of the central
bank's target range.
    At 0839 GMT the Hungarian forint was 0.38% weaker
against the euro at 331.20. The Czech crown and Polish
zloty were broadly flat at 25.86 and 4.3345
    "The recent lower than expected headline inflation might
have an effect on the forint...(It) means that the National Bank
of Hungary (NBH) can move its focus to the global central
banks," said Peter Virovacz, Senior Economist, Hungary at ING.
    "I'm not saying that the next move of the NBH will be an
easing, but with the lowering inflation and of course other
central banks doing easing..., it increases the chance that the
next move by the NBH will be rather a dovish one."
    The European Central Bank (ECB) is widely expected to
introduce a package of monetary easing and stimulus measures on
Thursday to offset the effects of an ongoing U.S.-Sino trade war
and a global economic slowdown.
    The U.S. Federal Reserve is also widely expected to cut
interest rates next week as policymakers race to shield the
global economy from risks, which include Britain's planned exit
from the European Union.
    Poland's Monetary Policy council will meet on Wednesday and
is expected to keep its benchmark interest rate at a record low
of 1.5%.
    The Czech inflation figure was mainly influenced by housing,
water, electricity, gas and other fuels, reflecting the tight
housing market, the country's statistics office said.
    "Although the domestic economy is a proinflationary factor
and as such it would be a reason strong enough to hike interest
rates, the Czech National Bank will remain cautious and it will
stay in the wait-and-see mode due to the risks in global
economy," Ceska Sporitelna/Erste said in a note.
    Bond yields across Europe rose after Reuters reported that
Germany was considering setting up independent public agencies
that could take on new debt to invest in the country's flagging
economy without falling foul of strict national spending rules.
    Polish bond yields ticked higher across the curve, with
10-year yields up 2 basis points at 2.1070%. 
    In the Czech Republic the yield on 10-year paper
rose 5 basis points to 1.3180% but 2-year and 5-year yields
    Stocks were mainly lower as investors stuck to the sidelines
ahead of the ECB's monetary policy meeting. Budapest's main
index was down 1.02% and Prague's PX index slid
0.39%. Warsaw's WIG 20 index was almost flat. 
            CEE       SNAPSH   AT                      
            MARKETS   OT      1039              
                      Latest  Previou  Daily    Change
                      bid     close    change   in 2019
 Czech      <EURCZK=  25.860  25.8500   -0.04%   -0.59%
 crown      >              0                    
 Hungary    <EURHUF=  331.20  329.950   -0.38%   -3.05%
 forint     >             00        0           
 Polish     <EURPLN=  4.3345   4.3345   +0.00%   -1.04%
 zloty      >                                   
 Romanian   <EURRON=  4.7315   4.7295   -0.04%   -1.64%
 leu        >                                   
 Croatian   <EURHRK=  7.3940   7.3985   +0.06%   +0.22%
 kuna       >                                   
 Serbian    <EURRSD=  117.50  117.530   +0.03%   +0.68%
 dinar      >             00        0           
 Note:      calculated from            1800            
 daily                                 CET      
                      Latest  Previou  Daily    Change
                              close    change   in 2019
 Prague               1029.4  1033.49   -0.39%   +4.34%
                           1       00           
 Budapest             40071.  40484.7   -1.02%   +2.38%
                          05        5           
 Warsaw               2175.7  2174.41   +0.06%   -4.43%
 Bucharest            9248.1  9234.57   +0.15%   +25.25
                           3                          %
 Ljubljana  <.SBITOP  847.83   847.45   +0.04%   +5.42%
 Zagreb               1877.0  1866.96   +0.54%   +7.33%
 Belgrade   <.BELEX1  750.86   753.14   -0.30%   -1.42%
 Sofia                573.24   573.70   -0.08%   -3.57%
                      Yield   Yield    Spread   Daily
                      (bid)   change   vs Bund  change
 Czech                                          spread
   2-year   <CZ2YT=R  1.2140  -0.0420   +204bp    -4bps
            R>                               s  
   5-year   <CZ5YT=R  0.9770  -0.0130   +184bp    -2bps
            R>                               s  
   10-year  <CZ10YT=  1.3180   0.0510   +189bp    +4bps
            RR>                              s  
   2-year   <PL2YT=R  1.5990   0.0040   +243bp    +1bps
            R>                               s  
   5-year   <PL5YT=R  1.8830   0.0100   +275bp    +0bps
            R>                               s  
   10-year  <PL10YT=  2.1070   0.0190   +268bp    +1bps
            RR>                              s  
            FORWARD   RATE    AGREEME                  
                      3x6     6x9      9x12     3M
 Czech Rep              2.10     2.00     1.85     2.14
 Hungary                0.32     0.35     0.38     0.23
 Poland                 1.74     1.72     1.71     1.72
 Note: FRA  are for ask                                
 quotes     prices                              

 (Reporting by Alan Charlish in Warsaw, Robert Muller in Prague
and Krisztina Than in Budapest
Editing by Mark Heinrich)
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