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Europe, Forex

Currencies rebound, focus on Fed and Polish CPI

WARSAW, July 31 (Reuters) – Central European currencies strengthened on Wednesday, rebounding from recent losses as investors digested higher-than-expected inflation data from Poland and eyed interest rate decisions in the U.S. and Czech Republic. Central European currencies had weakened in recent days as investors fretted over global trade and the increased likelihood of a no-deal Brexit. At 0910 GMT the Polish zloty had strengthened 0.11% against the euro to 4.2907, while the Hungarian forint was 0.17% stronger at 326.92. The Czech crown, which touched lows of 25.675 on Tuesday, was trading at 25.658 Polish flash CPI data for July showed a 2.9% year-on-year increase, ahead of analysts’ estimates of 2.6%, propelled by rising food prices. “The zloty is slightly stronger but I think this reflects the general sentiment among the CEE currencies, we don’t really expect the central bank to do anything despite the rising inflation,” said Piotr Poplawski, senior economist at ING in Warsaw. “Some investors may consider that the NBP (Polish Central Bank) may hike rates but I don’t really think that this is an option.” Polish rate-setter Rafal Sura said that July’s higher-than-expected inflation rate does not have a significant impact on the central bank’s stance over future rates. The Federal Reserve is scheduled to release its rates decision at 1800 GMT on Wednesday at the end of a two-day policy meeting, with markets expecting a quarter-percentage-point lowering of borrowing costs. The Czech central bank meets on Thursday, with rate-setters expected to leave the cost of borrowing unchanged at 2.00%. “Although domestic economic fundamentals point to more tightening and the CNB forecasting model likely will imply more hikes, we expect the fragile situation abroad and the risks stemming from the external environment to stop the race to neutral rates,” Komercni Banka analysts said. Czech 10-year bond yields were slightly lower at 1.233, while Polish 10-year yields were stable at 2.226. Stocks were mainly lower, with Prague’s PX index shedding 0.6%, penalised by a 1.8% drop in Vienna- and Prague-listed Erste Group Bank shares after the Austrian bank reported a 19% decrease in second-quarter net profit. CEE SNAPSHOT AT MARKETS 1222 CET CURRENCI ES Latest Previous Daily Change bid close change in 2019 Czech 25.6550 25.6700 +0.06% +0.20% crown Hungary 326.8000 327.4600 +0.20% -1.75% forint Polish 4.2925 4.2991 +0.15% -0.07% zloty Romanian 4.7340 4.7315 -0.05% -1.69% leu Croatian 7.3845 7.3795 -0.07% +0.35% kuna Serbian 117.6200 117.7000 +0.07% +0.58% dinar Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2019 Prague 1056.27 1062.220 -0.56% +7.07% 0 Budapest 40753.73 40843.78 -0.22% +4.13% Warsaw 2264.84 2263.92 +0.04% -0.52% Bucharest 9033.86 8995.40 +0.43% +22.35% Ljubljana 871.48 875.51 -0.46% +8.36% Zagreb 1908.75 1923.22 -0.75% +9.15% Belgrade <.BELEX15 744.24 746.99 -0.37% -2.29% > Sofia 581.34 581.48 -0.02% -2.21% BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=RR 1.1730 -0.0620 +194bps -5bps > 5-year <CZ5YT=RR 1.1050 -0.0180 +183bps -1bps > 10-year <CZ10YT=R 1.2330 -0.0270 +164bps -2bps R> Poland 2-year <PL2YT=RR 1.5520 -0.0060 +232bps +0bps > 5-year <PL5YT=RR 1.9270 0.0080 +265bps +2bps > 10-year <PL10YT=R 2.2190 -0.0050 +263bps +1bps R> FORWARD RATE AGREEMEN T 3×6 6×9 9×12 3M interban k Czech Rep < 2.13 2.03 1.92 2.16 PRIBOR=> Hungary < 0.34 0.42 0.48 0.26 BUBOR=> Poland < 1.74 1.74 1.72 1.72 WIBOR=> Note: FRA are for ask prices quotes ************************************************** ************ (Reporting by Alan Charlish in Warsaw and Jason Hovet in Prague; Editing by Alexandra Hudson)

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