Inflation and flash GDP numbers

This week, two sets of data are of high importance. First, we will see October inflation in Czechia, Hungary, Romania, Slovakia, and Serbia. In Czechia, Hungary, and Slovakia, we expect inflation to increase, which is a development that we anticipate happening toward the end of the year. In Romania and Serbia, we see headline inflation declining further. Second, we will see flash estimates of 3Q24 GDP growth in Poland, Romania, Slovakia, and Slovenia. We expect all economies to have expanded in the third quarter. Furthermore, industrial output growth for September will be published in Romania and Slovenia. Wage growth data is due in Romania and Slovakia. Finally, current account and trade data will be released in Romania, Serbia, and Poland.

FX market developments

Volatility was the main characteristic of the past week. CEE currencies began the week quite weak against the euro. After the outcome of the US election and Donald Trump being elected as the next US President, CEE currencies depreciated sharply but shortly. After the FOMC decision to lower key interest rates by 25bp, the currencies strengthened again and returned below the levels from the beginning of the week. The news that Germany will face snap elections also seemed to be positive for market developments. This week, inflation and flash GDP numbers could potentially have an impact on the FX market as far as local events are concerned. At this point, we see the Hungarian forint as the most vulnerable to both local and global factors.

Bond market developments

The outcome of the US elections had minimal impact on CEE bond markets. Government bond yields declined during the week, particularly in the latter half, following the Federal Reserve’s rate cut. The most significant drops in 10-year yields were observed in Hungary and Poland, with decreases of 25-30bp w/w. The 10-year Czech government bonds also benefited from a 25bp rate cut by the CNB last week. The Fed’s cut obviously provided some relief to Hungary’s fixed income market, as the FRA 6x9, which had risen sharply in recent weeks, fell by 35bp last week. This week is expected to be quite busy for local bond and bill issuances.

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