CEE: Consumer confidence at freezing point
On the calendar today, we have a series of second-tier data prints from the region. Consumer confidence will be published in the Czech Republic and Poland. In both cases, the indicators are currently at record low levels, well below the pandemic years. However, no significant improvement can be expected for November either, given persistent inflation and energy prices. In Hungary, labour market data for September will be published. We expect wage growth of 16.7% YoY, basically the same pace as in August, slightly above market expectations.
On the political front, the main focus remains on Hungary. Yesterday, we heard unofficial reports from journalists that the European Commission will recommend freezing part of the cohesion funds with the condition of further reforms, but will also recommend adopting the Hungarian RRF plan. In the end, this gives more flexibility in further negotiations, but the key will be the Ecofin meeting in two weeks' time. Today the saga will continue in the European Parliament, which has on its agenda a vote on Hungary's rule-of-law progress, which, although non-binding, could make a lot of noise in the markets. There is also a V4 meeting scheduled in Slovakia, which the Hungarian PM is expected to attend.
The forint jumped up to 410 EUR/HUF after yesterday's news, which the market initially assessed as negative. But in our view, it mitigates the risk that Hungary could lose some money and opens up room for longer negotiations. Hence, we expect the forint to correct down again today closer to 400 EUR/HUF. The potential headlines from the EP meeting, which already caused considerable pain in the FX market last week, are a risk.
Frantisek Taborsky
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