The forint should watch inflation on Friday

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The upcoming NBP meeting will route the zloty; the forint should watch inflation on Friday

Following solid regional PMI statistics released last Friday, Central Europe has been looking out for hard macro data in individual countries as well as a central bank´s interest-rate-setting meeting in Poland this week.

We believe that the upcoming macro releases – namely those in the Czech Republic and Hungary – will confirm ongoing recovery accompanied by low inflation. We do not expect either February retail sales or industrial production figures to trigger strong market reaction. The only macroeconomic indicator capable of attracting widespread attention appears to be the March inflation to be released in Hungary at the end of this week. In our view, the consumer price index might have slightly slipped in March to 0.2% in year-on-year terms (from 0.3% Y/Y in February) due to a base effect and low fuel prices. If the money market starts betting on further NBH’s easing more aggressively than so far, it will put forint´s exchange rate under pressure.

In any case, when looking for the key regional event of this week, we should focus on a NBP meeting scheduled for this Wednesday. In our view, the zloty should watch the MPC meeting very closely, as recent appreciation of the currency, the rate cut delivered by the NBH and ongoing deflation in Poland may place monetary easing back on NBP’s policy agenda.

Currencies		% chng
EUR/CZK	27.02	0.0
EUR/HUF	313.1	-0.2
EUR/PLN	4.25	0.2
EUR/USD	1.14	0.1
EUR/CHF	1.09	-0.3

FRA 3×6	%	bps chng
CZK	0.26	-1
HUF	0.91	-1
PLN	1.57	0
EUR	-0.25	-1

GB	%	bps chng
Czech Rep. 10Y	0.46	1
Hungary 10Y	3.03	0
Poland 10Y	2.82	-2
Slovakia 10Y	0.72	-2

CDS 5Y	%	bps chng
Czech Rep.	43	0
Hungary	150	1
Poland	88	0
Slovakia	42	0

The forint should watch inflation on Friday