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CEE MARKETS-Zloty betters peers as inflation reading sparks rate hike expectations

·3 min read

By Anita Komuves BUDAPEST, July 30 (Reuters) - The Polish zloty gained on Friday, outperforming its peers, as a higher-than-expected flash inflation reading raised expectations of tightening in the country where policymakers so far resisted normalising rates. The zloty firmed 0.23% to 4.5670 per euro as flash CPI data came in at 5% year-on-year in July, above expectations, rising from 4.4% year-on-year in June. "Inflation is much higher than expected, which will push up expectations of policy normalisation," an FX trader in Warsaw said. "However, the market reaction is muted and the zloty is only slightly stronger because we have to wait until November for a possible rate hike decision." The Polish central bank has not raised rates yet, even as its counterparts in Hungary and the Czech Republic tightened policy in June to fight inflation as economies had started rebounding from pandemic lows. The Hungarian central bank delivered its second rate hike on Tuesday and said that it would take "firm steps" on a monthly basis. The Hungarian forint weakened in the morning but recouped losses and was up 0.16% at 357.00 per euro. "The forint found its way back to the road of strengthening, and I expect this to continue next week," a Budapest-based FX trader said. Besides Tuesday's 30-basis-point rate hike, the currency is also helped by the U.S. Federal Reserve's communication, the trader said. Fed Chair Jerome Powell on Wednesday indicated that the central bank would wait further to taper stimulus, weakening the dollar and boosting CEE currencies in the previous session, with the Hungarian forint gaining the most. The crown edged down 0.03% to trade at 25.485 versus the common currency. Elsewhere, the Czech economy expanded by 0.6% in the second quarter versus the previous three months, lower than expected, data showed on Friday. On a year-on-year basis, the economy grew by 7.8% in real terms. Stock markets were mixed, with Warsaw easing 0.43% and Budapest sliding 0.35 while Prague gained 0.13%. CEE SNAPSHO AT MARKETS T 1125 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK= Czech EURHUF= Hungary 0 EURPLN= Polish EURRON= Romania EURHRK= Croatia EURRSD= Serbian 0 Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1206.00 1204.440 +0.13% +17.41 0 % .BUX Budapes 48142.1 48286.06 -0.30% +14.33 t 7 % .WIG20 Warsaw 2255.87 2265.69 -0.43% +13.70 % .BETI Buchare 11874.8 11874.76 +0.00% +21.10 st 4 % .SBITOP Ljublja <.SBITOP 1163.32 1163.00 +0.03% +29.14 na > % .CRBEX Zagreb 1949.25 1953.65 -0.23% +12.07 % .BELEX1 Belgrad <.BELEX1 775.66 775.66 +0.00% +3.61% 5 e 5> .SOFIX Sofia 570.71 570.87 -0.03% +27.52 % Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republi c CZ2YT=R s CZ5YT=R s CZ10YT= s Poland PL2YT=R s PL5YT=R s PL10YT= s FORWARD 3x6 6x9 9x12 3M interba nk Czech 1.30 1.69 1.93 0.73 Rep Hungary 1.97 2.13 2.24 1.35 Poland 0.36 0.55 0.69 0.21 Note: are for ask FRA prices quotes ********************************************* *****************

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