With the start of a new month, the calendar in the CEE region will be busy again. Today, GDP figures for the second quarter in Poland and Turkey and PMIs across the region will be released. We will also see GDP data this week – in Hungary tomorrow and in Romania on Friday.
More interesting will be the release of Turkey’s inflation data for August, where we expect a slowdown from 2.1% to 1.5% month-on-month. This should translate into 32.2% YoY, supporting a 300bp rate cut in September in our forecast.
On Wednesday, the National Bank of Poland will also meet and is expected to cut rates again by 25bp to 4.75%, in line with market expectations. We’ll be keeping a closer eye on the press conference the following day and the forward guidance for the rest of the year, given the slightly improved inflation picture as well as the higher-than-expected public finance deficit for next year.
On Thursday, inflation data will be released in the Czech Republic, where 2.7% should be confirmed for August, the same as in the previous month. On Friday, we will see more economic data from Hungary and the Czech Republic.
EUR/CZK has seen one of its biggest one-day moves this year, quickly sliding to 24.450 after Friday’s solid GDP data. While we saw a similar reaction in rates and have been bullish on the Czech koruna for some time, we believe that the FX move was too fast, and we should see some correction here, more likely to levels around 24.500.
Unlike the bond market, EUR/PLN did not react to the worse-than-expected draft state budget for next year, but we are still at the highest levels since the beginning of August. The fiscal outlook may be a reason for the NBP to bring in hawkish forward guidance, which makes the Polish zloty attractive at current levels, and we could see a return to lower levels below 4.250 EUR/PLN this week.
EUR/HUF remains without a major story for now, and we are rather neutral here. However, the currency still retains its long positioning from the summer, which makes the Hungarian forint vulnerable to external shocks, in our view.
Frantisek Taborsky
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