CEE Economies Show Resilience Amid Global Central Bank Focus

CEE: Recovery despite global story

This week, the calendar is light again in the region and the focus will be on the global central bank story. But before that, today we will see consumer confidence in the Czech Republic. Tomorrow, the Hungarian National Bank will meet and we expect the cutting cycle to remain unchanged, i.e., 100bps in the effective rate to 15%. Tomorrow we will also see labour market data in Poland and Hungary. In the Czech Republic, we can expect a few Czech National Bank (CNB) speakers ahead of Thursday's blackout period. Otherwise, market attention will be driven by the global story. 

In the FX market, we saw the region's rally stall last week, with the Hungarian forint and Czech koruna in particular weakening once again. The National Bank of Hungary meeting should be the main driver for the forint this week and we expect a hawkish tone versus market expectations to be positive for FX. The forint remains our favourite currency in the region due to by far the highest carry and attractive current levels. Moreover, we see the forint lagging behind Friday's renewed improvement in market conditions. Thus, in the short term, we expect a pullback back to 370 EUR/HUF. A stronger US dollar as a result of central banks in the second half of the week may be a problem and might also be an obstacle for the Czech koruna. However, it could be supported by the hawkish remarks of the CNB board members, so we expect a recovery from the weakest levels since March this year to 23.90 EUR/CZK