CEE Market Insights
We will see retail sales growth figures in almost all CEE countries this week, and we expect a series of solid prints, as the tight labor market supports high levels of spending. Apart from that, industrial output will be published in Croatia and Serbia. Will it show similar weakness as in Poland last week or continue to recover? Furthermore, two central bank meetings are scheduled this week. Poland will hold its rate-setting meeting on Wednesday, with Romania set for the following day. Both central banks are expected to keep their policy rates unchanged. In Poland, prior to the MPC meeting, the flash CPI for September will be published. If our expectations for inflation to ease marginally are confirmed, there are more arguments to preserve the status quo and reject any motions for policy change, especially as inflation was above the target for the last couple of months. In Slovenia, inflation should remain in a tight band around 2%. On Friday, Moody’s will publish its rating assessment of Czechia; a rating upgrade to Aa3 from A1 cannot be ruled out. The country’s public debt ratio has been shrinking, while the country has been sitting on a positive outlook for more than a year.
The dollar strength was not too positive for CEE currencies last week. The zloty already had most of its fall the week earlier after it became official that the ECJ will release its ruling on FX mortgages on October 3 this week. We upped our EURPLN forecast to 4.36 for the year-end on the news. We also increased our forecast for the EURHUF to 330-340 (from 325-335 envisaged earlier) after the MNB decided to increase surplus liquidity at its rate-setting meeting last week. The koruna continues to stay weak, even after the last meeting minutes (again) revealed the CNB bank board’s hawkish bias. We have our CZK forecast under revision, but still see some appreciation of the koruna going forward.
Yields and rates moved little last week in CEE. The Romanian market could see two successful 2024 and 2029 government bond auctions after three consecutive auctions were scrapped earlier, although demand did not really skyrocket. Political and fiscal issues are still in the limelight in Romania. Meanwhile, the NBS seems to need to increasingly intervene on the Serbian dinar market, which underlines the risk that another rate cut could be in the cards already at the next monetary meeting. While this is not our baseline yet, we are watching how much the NBS needs to intervene in the coming weeks.