CEE Economic Snapshot: Weak Data Signals Struggles for Hungary and Czech Republic

CEE: Weak data confirming weak economy

The calendar today offers data on industrial production in Hungary and retail sales in the Czech Republic for September. In both cases, we expect confirmation of the weak performance of the economy. In Hungary, we will hear from the Minister of Economic Development. However this time it will probably not be market-oriented. Also, the two-day meeting of the National Bank of Poland (NBP) officially starts today but we won't see the outcome until tomorrow.

On the FX side, EUR/CZK is back up after the surprise stable Czech National Bank (CNB) rates last week which supported the CZK. As we mentioned in our CNB review earlier, we expect weaker economic data and new bets on a rate cut in December to lead EUR/CZK higher again in our view. Yesterday's industrial production results were the first opportunities and more data to come this week including today's retail sales. At the same time, the interest rate differential hasn't changed much since the CNB meeting and therefore we don't see a justification for lower EUR/CZK levels at the moment. With that said, we see EUR/CZK above 24.50 for the days ahead.