The second half of the month usually switches to quiet mode in the CEE region as the global story takes over.
Today, we will see some data from Poland and the Czech Republic. Core inflation in Poland, according to our calculations, fell from 3.2% to 2.9% year-on-year in October. PPI in the Czech Republic should continue to show some price decline.
Tomorrow, the National Bank of Hungary will take centre stage. The rate decision should be a non-event, and we expect rates to remain unchanged at 6.50%. The market will focus on forward guidance, especially after the increase in the planned public deficit. While hawkish guidance is widely expected, there is not much possibility of a tougher tone compared to previous meetings, building some dovish risk. The rest of the week will be rather quiet.
While the Czech koruna saw record highs and the Polish zloty also traded with some gains, the Hungarian forint lagged behind its peers for the first time in a while. Although the risk is more on the dovish side for the NBH meeting, the baseline hawkish tone should help keep HUF on the stronger side. At the same time, global factors should remain positive for the CEE region if the US stock market stabilises. The Hungarian government reiterated in recent days that the new US “financial shield” should protect the HUF in case of a sell-off, which is likely to provide some security for investors. We therefore expect EUR/HUF to remain near 384 here despite some narrowing of the rate differential last week.
Chris Turner
