Fx, stocks rebound, rates seen on hold in Warsaw, Bucharest

03 Oct, 2018

Stocks also tracked euro zone peers higher after Italian daily Corriere Della Sera said Rome's budget deficits could be lower than earlier planned.

Budapest's main stock index, knocked down in the previous session by worries over Italy, rose 1 percent by 0810 GMT, approaching Monday's four-week high.

Hungarian data released on Wednesday showed a pick-up in annual retail sales growth to 6.8 percent in August from 5.3 percent in July, underpinning consumption as a key economic driver, like elsewhere in Central Europe.

The region's most liquid currencies, the forint and the zloty were both 0.1 percent firmer against the euro by 0810 GMT. The forint had set a six-week high in early trade at 322.4.

The two units have outperformed the crown and the leu in recent weeks, even though the Hungarian and Polish central banks have kept interest rates at record lows, while their Czech and Romanian peers have raised rates to fight inflation.

Analysts expect the Polish bank to keep its main rate at 1.5 percent at its meeting on Wednesday, and retain its forecast for no change possibly for years, after Poland's annual inflation slowed to 1.8 percent in September.

The Polish and the Romanian central banks target the same inflation range, at 1.5-3.5 percent.

The Romanian bank has been increasing interest rates because Romanian inflation has accelerated to levels around 5 percent, even though it is expected to retreat in the last months of the year.

But the central bank is also seen holding fire on Wednesday.

Its comments about its future rate course will be closely watched after a softening in its rhetoric at its last rate meeting two months ago.

The leu, trading at 4.666 versus the euro, was steady, but near last week's three-month low of 4.671.

The crown, easing 0.1 percent to 25.806, hovered near 2-and-1/2-month lows, even though the Czech central bank increased its rates at each of its last three rate meetings, the last time last week.

The leu and the crown have still well outperformed the zloty and the forint this year, even though the past weeks' rebound in emerging market currencies left them underperformers.

"We believe that those currencies which suffered previously the most will do best in the coming weeks and months," Raiffeisen analyst Sebastian Petric said in a note.

"Among our favourite longs are, for instance, the Polish zloty," he added.

Central European credit "is still one of the resilient areas in emerging markets, the fundamentals still look very strong and growth is still broad-based across the CEE space, still solid," said ING analyst Trieu Pham.

Copyright Reuters, 2018
 

 

 

 

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