Two central banks meetings

There are two central bank meetings scheduled this week. In Poland, we expect stability of rates, while in Czechia, an interest rate cut is quite likely. Other than that, we get to see inflation in Czechia, Croatia and Slovenia. Czechia will release a flash inflation estimate for the first time, shortly ahead of the central bank decision. Inflation in January should remain close to the target. Data on the retail sector performance in December will be published in Hungary, Romania and Slovakia. In Hungary, we have already seen the flash estimate for 4Q24, but in Romania and Slovakia, retail sales growth will complete the data for the last quarter of 2024. In Czechia, Hungary and Slovakia, industrial output growth will also be published. Finally, trade data is due in Hungary, Slovenia and Slovakia.

FX market developments

The FX market has been quite stable over the last week. The CEE currencies have held strong against the euro. The EURHUF went down to 408 and the EURPLN was shortly at 4.20. The EURCZK, on the other hand, went in the opposite direction and moved up to 25.13. Improvement of global risk assessment is supporting local currencies, especially the Hungarian forint and Polish zloty. This week, the central bank meeting in Czechia may provide some impulse for the Czech koruna. While monetary easing is not set in stone, recent comments from the central bankers, including Governor Michl, suggest we should see the key interest rate going down to 3.75%. In Poland, the interest rate cuts have been postponed until July 2025, at least.

Bond market developments

CEE government bonds rallied last week, supported by falling bond yields on major markets. ROMGBs performed exceptionally well, with 10-year yields dropping nearly 50 basis points w/w from their previously elevated levels. It was also a successful week for Romania in terms of domestic issuance. The MinFin saw strong demand, with bid-cover ratios well above 2 in auctions of 6Y, 8Y and 10Y bonds, compared to similar auctions in previous weeks. The MinFin borrowed RON 2.8bn, with RON 1.57bn coming from 2Y bonds, marking the fourth-largest borrowed volume in the last 12 months. This week, in addition to regular bond auctions in Poland and Hungary, only T-bills will be offered in Hungary.

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