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Europe, Forex

CEE currencies gain after dovish Fed comments

WARSAW, July 11 (Reuters) – Central European currencies gained on Thursday after Federal Reserve Chair Jerome Powell set the stage for a U.S. interest rate cut this month, weakening the dollar. In testimony to a congressional committee, Powell pledged to “act as appropriate” to defend an economic expansion threatened by trade disputes and a global slowdown. Before Powell’s comments, central Europe’s currencies had been under pressure since last Friday, when strong U.S. jobs data weakened the case for loosening policy in the world’s biggest economy. At 0927 GMT, the Polish zloty was bid at 4.2667, after having touched 4.2754 on Wednesday. The Czech crown was stronger at 25.594 and the Hungarian forint gained to 325.62 after touching 326.10 on Wednesday. “Today the (zloty) market is getting up for another attack on 24, but this will take a bit of time,” said Piotr Poplawski, senior economist at ING in Warsaw. “I think investors are now waiting for inflation from the States to give them some incentive that the Fed will cut rates and this will support the CEE currencies.” Czech bond yields tracked eurozone peers lower. Polish yields were little changed before a switch tender. “An extremely dovish signal from Fed Chair Powell’s testimony brings positive impetus for CEE debt markets,” Raiffeisen analysts said in a note. “Still it remains to be seen whether a larger part of dovish outlook was already priced in.” At 0949 GMT, Czech 10-year bonds were bid at 1.424, down 3 basis points. Polish yields were little changed at 2.25. Czech inflation showed price growth slowed last month, as expected. The central bank has signalled a pause in policy moves into next year after raising rates eight times since 2017, the last coming this May. “Price pressures in the Czech economy are not as hot as at the start of the year,” said Radomir Jac, chief economist for Generali Investments CEE. “The central bank can stay in wait-and-see mode.” CEE SNAPSHOT AT MARKETS 1149 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech 25.5980 25.5990 +0.00% +0.43% crown Hungary 325.6100 325.9300 +0.10% -1.39% forint Polish 4.2680 4.2682 +0.00% +0.51% zloty Romanian 4.7355 4.7335 -0.04% -1.72% leu Croatian 7.3930 7.3923 -0.01% +0.23% kuna Serbian 117.6500 117.7300 +0.07% +0.55% dinar Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1050.48 1047.250 +0.31% +6.48% 0 Budapest 40980.91 40577.79 +0.99% +4.71% Warsaw 2330.53 2312.77 +0.77% +2.37% Bucharest 8960.59 8887.39 +0.82% +21.36% Ljubljana 888.83 887.83 +0.11% +10.52% Zagreb 1882.41 1880.96 +0.08% +7.64% Belgrade <.BELEX15 756.31 756.63 -0.04% -0.71% > Sofia 582.71 580.64 +0.36% -1.98% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=RR 1.4670 0.0050 +220bps +1bps > 5-year <CZ5YT=RR 1.3030 -0.0080 +195bps -1bps > 10-year <CZ10YT=R 1.4240 -0.0310 +173bps -3bps R> Poland 2-year <PL2YT=RR 1.5630 -0.0100 +230bps +0bps > 5-year <PL5YT=RR 1.8630 -0.0090 +251bps -1bps > 10-year <PL10YT=R 2.2520 0.0100 +256bps +1bps R> FORWARD RATE AGREEMEN T 3×6 6×9 9×12 3M interban k Czech Rep < 2.17 2.07 1.95 2.17 PRIBOR=> Hungary < 0.31 0.40 0.48 0.25 BUBOR=> Poland < 1.73 1.74 1.71 1.72 WIBOR=> Note: FRA are for ask prices quotes ************************************************** ************ (Reporting by Alan Charlish in Warsaw, Jason Hovet in Prague and Krisztina Than in Budapest; editing by Larry King)

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