CEE: Region remains under pressure – ING

Yesterday's GDP data for the third quarter disappointed, especially in Hungary, confirming a return to technical recession, but the data in the Czech Republic was also slightly weaker, below central bank expectations, ING’s FX analyst Frantisek Taborsky notes.

CEE currencies remain under pressure

“Inflation numbers in Poland for October will be published today, the first in the Central and Eastern Europe (CEE) region. Our economists expect a slight pick-up from 4.9% to 5.1% YoY, one-tenth above market expectations. However, core inflation in particular surprised to the upside in September and may get more attention this time.”

“CEE currencies remain under pressure and we maintain a bearish view going forward. EUR/HUF moved to new highs and traded above 408 for a while yesterday. Valuations show significant cheapness of HUF assets, on the other hand, the market is risk-off ahead of the US elections and not much willingness to take too much risk ahead of the risk event. Thus, we do not see much reason for improvement and approaching 410 EUR/HUF seems to be the next test, which could be an uncomfortable level for the central bank.”

“In Poland, it was only at the end of yesterday's trading that the POLGBs market reflected the surprisingly high deficit increase announced a day earlier and today we could see further reverberations of market fears of higher bond supply, exposing PLN as well. In the Czech Republic, the CNB blackout period starts later today and so far we haven't heard much. That means today is the last chance to see any headlines, but the 25bp November cut seems like a done deal.”