CEE MARKETS-Lower than expected Hungarian inflation weighs on forint

OTP Bank Nyrt.

10/06/2024 09:46

By Boldizsar  Gyori
       BUDAPEST, June 10 (Reuters) - The forint led losses
among central European currencies on Monday after Hungarian
inflation rose less than expected, keeping rate cut expectations
alive.
    Data showed Hungary's inflation  HUCPIY=ECI , which hit a
European Union high of over 25% last year, was an annual 4% in
May, the top of the central bank's policy target band.
        "Inflation accelerated below expectations, which fuelled
the market's rate-cut expectations," a Budapest trader said.
"Right now it is up in the air whether the central bank will cut
25 or 50 basis points (bps)."
    Hungary's forint  EURHUF=  had weakened 0.2% against the
euro to trade at 392.4 by 0808 GMT.
    Deputy central bank governor Barnabas Virag said on Monday
that strong service sector inflation and high wage dynamics
meant a careful and patient monetary policy was needed.
    Virag has previously signalled the base rate could fall to
6.75%-7% by the end of June, implying a 25-bps or a 50-bps cut
from current levels.
    Elsewhere in the region, the zloty  EURPLN=  returned to
trade at 4.31 against the euro after touching a one-month low at
4.32 in early trade.
    ING BSK analysts said room for the zloty to weaken against
the euro in the short term had been exhausted. 
    "The current weakening of the zloty is due to large
revaluations of expectations for (U.S.) Fed rate cuts, while
domestic fundamentals remain supportive," they said in a note.
    They pointed to a sharp rise in U.S. payrolls in data
published on Friday sending the dollar higher against the euro,
which - in addition to the closing of carry trade positions -
hurt central European currencies.
    "A correction/strengthening of the zloty at the beginning of
the week seems quite likely, unless EUR/USD deepens the decline
already at the beginning of the week," ING BSK said.
    The Czech crown  EURCZK=  held at stronger levels after
hitting nearly five-month highs last week below the 24.60 per
euro level. It traded at 24.623 on Monday.
    Attention was turning to May inflation data due on Tuesday,
with analysts expecting a slight slowdown after a surprise jump
in the previous month.
    "But if there was a bigger upward surprise like in the
previous month, the crown could go on the offensive," bank CSOB
said. "On the other hand, the crown should be watching
international markets - mainly the Fed sitting (this week) that
could close any space for profits."
    
                  CEE       SNAPSHO   AT                       
                  MARKETS   T        1008 CET           
                            CURRENC                            
                            IES                         
                            Latest   Previous  Daily    Change
                            bid      close     change   in 2024
 EURCZK=  Czech                                        
 EURHUF=  Hungar                 0                     
          forint                                        
 EURPLN=  Polish                                       
 EURRON=  Romani                                       
                                                               
          Note:   calculat                     1800            
          daily   ed from                      CET      
          change                                        
                                                               
                            Latest   Previous  Daily    Change
                                     close     change   in 2024
 .PX      Prague   .PX      1540.47  1546.760   -0.41%   +8.94%
                                            0           
 .BUX     Budape   .BUX     69889.5  69879.43   +0.01%   +15.29
          st                      2                           %
 .WIG20   Warsaw   .WIG20   2419.27   2428.84   -0.39%   +3.26%
 .BETI    Buchar   .BETI    18106.8  18076.69   +0.17%   +17.80
          est                     6                           %
                                                               
                                               Spread   Daily
                                               vs Bund  change
                                                        in
          Czech                                         spread
          Republ                                        
          ic                                            
 CZ2YT=R                                           s  
 CZ5YT=R                                           s  
 CZ10YT=                                          s  
          r                                             
          Poland                                               
 PL2YT=R                                           s  
 PL5YT=R                                           s  
 PL10YT=                                          s  
          r                                             
          Note:   are for                                      
          FRA     ask                                   
          quotes  prices                                
          ***********************************                  
          ***************************                   
 
 (Reporting by Boldizsar Gyori in Budapest, additional reporting
by Badohal Karol in Warsaw and Jason Hovet in Prague; Editing by
Mark Potter)
 ((boldizsar.gyori@thomsonreuters.com;))
 
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