The last rate-setting meetings of the year will take place in Czechia and Hungary this week.
- Hungary: The central bank is expected to maintain its key policy rate at 6.5%, largely due to the persistent weakness of the Hungarian forint (HUF).
- Czechia: Stability is also anticipated, with rates remaining at 4.0%, although a rate cut cannot be entirely ruled out.
In Poland, economic data releases for November, including industrial output and retail sales growth, will provide insights into fourth-quarter economic performance. Additionally, several countries in the region will publish inflation figures and producer price data for November.
Labor Market Updates:
- Slovakia and Croatia: Unemployment rate figures are due.
- Poland and Croatia: Wage growth data will be released.
This is the final edition of CEE Market Insights for the year. We wish our readers a peaceful holiday season. The next issue will be available on Tuesday, January 7, 2025.
FX Market Developments
Last week saw mixed performance among regional currencies:
- The Polish zloty (PLN) weakened against the euro.
- The Czech koruna (CZK) and the Hungarian forint (HUF) showed slight gains.
The EUR/HUF exchange rate fell below 410, but the Hungarian currency remains notably weak, influencing the central bank’s likely decision to keep rates unchanged at its upcoming meeting. Meanwhile, the Czech koruna is expected to see policy stability.
The Hungarian forint has been the region’s underperformer this year, lagging behind its peers. In contrast, the Romanian leu (RON) has remained stable due to central bank interventions. However, depreciation pressures may resurface after Romania’s presidential elections next year.
Bond Market Developments
Last week’s ECB decision to cut interest rates by 25 basis points had a muted impact on bond markets.
Key movements:
- Hungarian Government Bonds (HGB) and Romanian Government Bonds (ROMGB) yield curves declined, with ROMGBs seeing significant movement.
- Romania’s progress in forming a new government and discussions on freezing some expenditure increases suggest awareness of the country’s fiscal challenges.
Upcoming Bond Auctions:
- Romania: Reopening of ROMGBs 2028 and 2030.
- Czechia: Sale of floating-rate bonds (floaters).
- Hungary and Poland: Regular bond auctions.
- T-bills: Scheduled in Croatia, Hungary, and Romania. Notably, the Czech T-bill auction has been canceled.
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