Final inflation numbers and trade data

This week, September's inflation numbers will be published in several CEE countries. Flash estimates for September have already been released in Croatia and Poland; Slovakia has also published its HICP flash inflation figures. Based on these estimates, we do not expect the official data to deviate significantly. In addition to inflation, producer prices for September will be released in Czechia. Trade data and current account balances will also be published in numerous CEE countries, such as Romania, Poland, Serbia, and Slovakia. Finally, wage growth and unemployment rates for September will be reported in Slovakia.

FX market developments

The Hungarian forint and Polish zloty showed signs of gaining momentum during the week, but ultimately continued to depreciate by the end of the week. The EURCZK, EURHUF, and EURPLN all remained higher. We believe that global factors are mostly behind these movements. These recent developments in the foreign exchange market will have implications for Hungarian monetary policy, in particular. Deputy Governor Virag has indicated that the volatility of the local currency may prompt the bank to pause monetary easing despite inflation easing in September. Higher levels of the EURCZK may also lead to a lower number of rate cuts in Czechia. Looking ahead, the key event this week will be the ECB decision. Since the September meeting, economic data has been released indicating the need for a further rate cut of 25bp at next week's meeting.

Bond market developments

Last week, CEE government bond yields followed the increase in yields on major markets, which have seen upward movements since the beginning of the month. Czech and Polish 10Y yields jumped the most in the region, as the reaction of HGBs has been muted by earlier volatility. The Romanian MinFin faced good demand at the reopening of ROMGBs 2023, and placed about RON 570mn, so similar volume to the last reopening in September, but with a significantly higher bid-to-cover ratio this time (1.79). The Czech National Bank announced that, as of the beginning of next year, the minimum reserve requirements ratio, at which the central bank does not pay any interest, will be doubled to 4% from 2%. The Slovak Ministry of Finance announced that it plans to issue retail bonds in spring 2025. The volume should be relatively small and cover just 2.5% of 2025 gross financing needs. This week, Romania will reopen ROMGBs 2027 and 2035; Czechia will offer CZGBs 2032 and 2043. Hungary will sell T-bills along with the regular auction of T-bonds.

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