Quiet week ahead of Easter time
|Only a couple of releases are scheduled in the region ahead of Easter in most CEE countries. The most important is industrial output growth in Romania, which will complete the set of data for industry performance in February in the region. We expect industry in Romania to decline. Apart from that, Croatia, Poland and Slovakia will publish final inflation numbers for March. Czechia and Slovenia will release growth of producer prices in March. Finally, Serbia and Slovakia will publish current account data. Otherwise, global developments and the aftermath of Trump’s tariffs announcement will be in focus.
FX market developments
It has been quite a roller coaster for the FX market over the last couple of weeks. Trump’s announcement of global tariffs made CEE currencies depreciate against the euro quite substantially the other week. On April 9, however, Trump paused the reciprocal tariffs and lowered the rate to 10% for every country apart from China. CEE currencies appreciated visibly the following day. By the end of the week, however, the EURCZK moved up, the EURPLN increased toward 408 and the EURPLN went up to 4.28. Global development will remain key for the FX market in the foreseeable future, especially as the ECB meeting is due this week.
Romania kept the interest rate stable at 6.50%, but it could resume monetary easing in August conditional on the presidential election outcome. The Serbian central bank also kept the policy rate unchanged at 5.75% last week. Our base case is that Serbia’s central bank will deliver the first interest rate cut in July, as we expect inflation to be under 4% y/y by then. However, given turbulent global and local developments, we expect the central bank to remain cautious, delivering only two cuts this year in total.
Bond market developments
Bond market performance was mixed last week. In most CEE countries, long-term yields have increased to some extent. 10Y yields are slightly lower this week only in Croatia and Poland. In Poland, the surprising turn of the central bank toward monetary easing as soon as May is likely behind such development. The FRA rates 6x9 declined visibly. According to Kotecki, the central bank will not be deciding whether to cut the interest rate, but by how much. Over the last week, Czechia, Hungary, Slovenia and Romania successfully placed government papers on the market. Global factors will continue to determine bond market developments.
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