CEE MARKETS-Zloty leads gains ahead of expected strong Q1 GDP data

Reuters
·3 min read

BUDAPEST, May 16 (Reuters) - The Polish zloty firmed on Monday ahead of Tuesday's gross domestic product (GDP) figures, which are expected to show robust growth in the first quarter amid growing headwinds for Central European economies. At 0845 GMT, the zloty was 0.5% stronger at 4.6725 against the euro, outperforming the Hungarian forint and the Czech crown, which gained 0.3% and 0.2%, respectively. Poland, the region's biggest economy, is expected to report 8% first-quarter economic growth on Tuesday, accelerating from 7.3%, while analysts project Hungary's growth easing to 6.9% from 7.1% in the previous three months. The Hungarian central bank's deputy governor last week, however, said that first-quarter growth could in fact exceed 8% in Hungary as well, signalling a strong momentum before an expected slowdown later this year. "Reports from the domestic economy pointing to the continued good economic conditions will be a potential factor supporting the zloty, but it is the moods in the global markets that will be their main determinant," Bank Millennium said in a note. "These, in turn, are determined, on the one hand, by expectations for further monetary policy tightening in the U.S., and, on the other hand, by growing concerns about a slowdown in the economy." U.S. rate hikes and a stronger dollar are hitting investor appetite in the region. Last week, U.S. Federal Reserve Chair Jerome Powell repeated his expectation of half-percentage-point rate rises at the next two policy meetings. After sharp interest rate hikes around central Europe since last year, fears of an end to tightening, like in the Czech Republic, or a slowing pace, such as in Hungary, have started pressuring currencies, prompting the Czech central bank to intervene last week. The Czech and Hungarian central banks, which last June became the first in the European Union to launch big rate hikes to fight inflation, surprised investors last week by looking ready to step on the brakes, wary of stifling economic growth. Analysts said the comments came as a surprise as inflation is still surging in both countries. "In connection with the war in Ukraine, there is a threat of outages in imports of some agricultural commodities and there have been also disruptions in deliveries of some key components in industry, namely for the carmakers, which can strengthen price pressures further," Generali Investments CEE Chief Economist Radomir Jac said. Even with Monday's gains, the zloty and the forint remain in the red for the year despite massive monetary tightening by their central banks, with the forint posting a 4% loss so far, the worst in Central Europe. CEE SNAPSHO AT MARKETS T 1045 CET CURRENC IES Latest Previou Daily Change s bid close change in 2022 EURCZK Czech EURHUF Hungary 0 0 EURPLN Polish EURRON Romanian EURHRK Croatian EURRSD Serbian 0 0 Note: calculated from 1800 daily CET change Latest Previou Daily Change s close change in 2022 .PX Prague 1299.25 1296.91 +0.18% #VALUE! 00 .BUX Budapest 41502.6 41255.7 +0.60% -18.17% 5 0 .WIG20 Warsaw <.WIG20 1787.48 1765.63 +1.24% -21.15% > .BETI Buchares 12217.6 12133.1 +0.70% -6.46% t 8 6 .SBITO Ljubljan <.SBITO 1125.43 1118.43 +0.63% -10.36% P a P> .CRBEX Zagreb <.CRBEX 2075.58 2082.46 -0.33% -0.18% > .BELEX Belgrade <.BELEX 812.85 818.16 -0.65% -0.97% 15 15> .SOFIX Sofia <.SOFIX 601.81 599.63 +0.36% -5.33% > Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT= 2-year s CZ5YT= 5-year s CZ10YT s Poland PL2YT= 2-year s PL5YT= 5-year s PL10YT s FORWARD 3x6 6x9 9x12 3M interba nk Czech Hungary Poland Note: are for ask FRA prices quotes ******************************************** ****************** (Reporting by Gergely Szakacs; Editing by Rashmi Aich)

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