FX Daily: Rate spreads widen to late 22 levels | articles

FX Daily: Rate spreads widen to late 22 levels | articles
FX Daily: Rate spreads widen to late 22 levels | articles

Today in the CEE region, the PMIs for March will be published. These are unlikely to have changed much from the previous month. In the Czech Republic, we will also see Czech National Bank (CNB) minutes from the last meeting and the first quarter state budget result. Minutes should show a discussion on the pace of rate cuts and perhaps some dovish signals given the two members voting for faster rate cuts. Tomorrow, Turkey’s March inflation will be released, increasing from 67.1% to 70.1% YoY (above market expectations, according to our estimates). On Thursday, the National Bank of Poland (NBP) and the National Bank of Romania (NBR) will decide on rate settings. In both cases, we expect rates to remain unchanged. It will, however, be interesting to see indications regarding a possible cut later this year from each. On Friday, we will see monthly data in Hungary and the Czech Republic including industrial production and retail sales.

In markets this morning, we should see a reaction to the sharp downward surprise in Polish inflation on Friday, when the markets were closed. This should support further receiving flow in the rates space, which may temporarily undermine PLN and delay our expected return to 4,290 EUR/PLN. The NBP should maintain its hawkish bias at least for now and in turn support PLN later this week. Conversely, the CZK could benefit from a fresh wave of payers in the IRS curve, a reversal in positioning and a significant improvement in the rate differential in recent days. Some volatility could come from the CNB minutes with unclear forward guidance from the central bank. We remain rather negative on the HUF, which we fear strengthened too quickly after the National Bank of Hungary’s meeting, following the unwinding of several rate cuts in the IRS curve. Next week, with the release of March inflation, we could therefore see a reality check.

Frantisek Taborsky

The article is in Dutch

Tags: Daily Rate spreads widen late levels articles


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