Conflict between neighbouring Ukraine and Russia has slowed economic recovery in Central Europe, contributing to expectations that Poland's central bank will resume rate cuts that appeared to have ended last year.
The region's most liquid currencies, including the zloty
Analysts said investors would watch Polish employment and corporate sector wages figures for July, due at 13:00 PM BST, and Wednesday's industrial output data, for clues on central bank policy and the direction of the zloty and Polish bonds.
Rate setters have been split over the need for an interest rate cut. Rate-setting council member Anna Zielinska-Glebocka was quoted as saying on Monday that recent data and developments were pushing the bank closer to a 25- or 50-basis-point cut in its 2.5 percent main interest rate.
"If the data disappoint, the probability of an NBP (central bank) rate cut in September will rise," Commerzbank said in a note. "However, any impact on the PLN (the zloty) is likely to be moderate, as most market participants expect a rate cut in the next few months anyway."
Hungary's central bank ended two years of rate cuts last month, reducing its base rate to 2.1 percent. But Treasury bill yields fell to record lows, decoupling from the base rate, partly due to buying by local funds that no longer have access to the central bank's two-week facility.
Traders will watch an auction of 3-month Treasury bills, which were sold at an average yield of 1.47 percent a week ago. Short-term Hungarian yields may stay low as bill expiries are expected to exceed sales in the next weeks, making it cheap to speculate against the forint, Erste Investment said in a note.
The brokerage recommended investors bet for a weakening of the forint
The region's main equity indices mostly rose, led by a 0.9 percent gain in Budapest <.BUX>. Hungarian government bond yields dropped by 3-4 basis points.
Russia is working on more retaliatory measures in case Western nations impose new sanctions, President Vladimir Putin's spokesman, Dmitry Peskov, said on Tuesday. A newspaper report on Monday said a car import ban was possible, which could hit economic output in several Central European states hard.
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**************** CEE MARKETS SNAPSHOT AT 0957 CET ************
************************* CURRENCIES *************************
Latest Previous Daily Change
bid close change in 2014
Czech crown
Hungary forint
Polish zloty
Romanian leu
Croatian kuna
Serbian dinar
Note: daily change calculated from previous close at 1800 CET
**************************** STOCKS **************************
Latest Previous Daily Change
close change in 2014
Prague <.PX> 987.54 984.68 +0.29% +0.06%
Budapest <.BUX> 17830.22 17670.58 +0.90% -2.75%
Warsaw <.WIG20> 2453.66 2448.73 +0.20% +2.05%
Bucharest <.BETI> 7060.97 7067.33 -0.09% +9.00%
Ljubljana <.SBITOP> 793.94 790.02 +0.50% +23.86%
Zagreb <.CRBEX> 1841.07 1833.17 +0.43% +3.41%
Belgrade <.BELEX15> 0.00 612.93 +0.00% -100.0%
Sofia <.SOFIX> 541.36 542.50 -0.21% +10.17%
***************************** BONDS **************************
Yield Yield Spread Daily
(bid) change vs Bund change in
Czech Republic spread
2-year
5-year
10-year
Hungary
3-year
5-year
10-year
Poland
2-year
5-year
10-year
******************* FORWARD RATE AGREEMENTS ******************
3x6 6x9 9x12 3M interbank
Czech Rep
Hungary
Poland
Note: FRA quotes are for ask prices
**************************************************************
(Reporting by Reuters buros)
By Sandor Peto
