Glance at GDP structure and August’s inflation

It will be quite a busy week in the region, as numerous important releases are scheduled. Let's begin with the 2Q24 GDP structure of Croatia, Czechia, and Poland. While the flash estimate of growth was released in mid-August for Czechia and Poland, Croatia's 2Q24 growth dynamics will be seen for the first time. We believe that private consumption remains the key driver of growth. Additionally, flash estimates of August's inflation will be published in Croatia, Poland, Slovenia, and Slovakia (as part of the HICP flash estimates for the Eurozone). We expect to see similar inflation footprints as in July's numbers. In Hungary, the central bank meeting is the key event of the week, and this time we expect no change in policy rates due to inflation development in July. Finally, Serbia will release the performance of the industry and retail sectors in July, as well as trade data for June. We see Serbia remaining on track for solid economic development in 2024. July's retail sales growth will also be due in Croatia and Slovenia this week. Last but not least, on Friday, after market close, Fitch will publish the rating and outlook revision of Romania. We do not expect any changes.

FX market developments

Throughout last week, the EURCZK and EUHUF moved downwards more visibly, whereas the EURPLN moved in the opposite direction but came back to 4.26. One reason for such development in the Polish zloty may be a change in Governor Glapinski's stance regarding the beginning of monetary easing. He suggested last week that there may be space to discuss rate cuts prior to 2026. This week, the Hungarian central bank is holding a rate-setting meeting. This time, we do not expect any changes to the key policy rate as inflation in July surprised to the upside. However, for the remainder of the year, we still see some space for the key policy rate to decrease.

Bond market developments

Bond yields declined in both CEE and major markets last week, driven by expectations that the Jackson Hole symposium will provide more clarity on the extent of the Federal Reserve’s monetary easing, anticipated to begin in September. Hungarian government bonds benefited from lower Treasury yields, particularly at the short end of the curve. Although we expect Hungary’s central bank to pause its monetary easing at Tuesday’s meeting, we believe that the monetary easing by major central banks this autumn will pave the way for further rate cuts in Hungary. Yields on Romania’s government bonds edged up last week, as the Ministry of Finance placed a lower volume of T-bills than initially planned, due to low demand. This week, the auction calendar includes Hungary’s T-bills, ROMGB 2026, and various bonds offered by Poland.

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