Trade war with the US would negatively impact CEE

Erste Bank Research Team Erste Bank

On the radar

Unemployment rate in Hungary arrived at 4.2%.
At 10.30 AM CET Slovenia will release retail sales growth in August.
There are no other releases scheduled in CEE.

Economic developments

There are two issues we see having potentially the greatest impact on the markets globally: future US trade policy and the development of the country’s public budget. Donald Trump has repeatedly called for tariffs of 10% on all imports and 60% on imports from China. In the latest CEE Special Report US election: What would a Trump victory mean for CEE we try to quantify the economic impact of global trade wars on CEE based on the German Economic Institute estimates. The institute looked at the impact of tariffs on the world economy, including Germany. We use its estimates for Germany as a key input to estimate the impact on CEE. A -1.4% shock to the German economy would translate into lower GDP growth for CEE economies ranging from -1.0% to -0.2% in the first year after the shock (depending on the country). Romania and Czechia would be the most impacted countries, with GDP growth coming in around 1.0 percentage points lower. The GDP response in Czechia is quite intuitive, given the country’s ties to Germany through the manufacturing sector. Romania has the lowest share of gross value added in German exports and final demand. But because Romanian suppliers are smaller and prone to be less integrated in the value chains also due to geographical distance, they are also prone to being cut off first. Poland, Slovakia and Hungary would see GDP growth dropping between -0.8% and -0.5%. Croatia is the least exposed to German underperformance.

Market movements

The Polish zloty changed the trend at the end of the week and joined the Czech koruna and the Hungarian forint in being weaker against the euro this week. Long term yields remain lower since the beginning of the week. Polish MPC member Kotecki expressed his hopes that Governor Glapinski will sustain his recent dovish tone according to which the interest rate cut could come in March 2025. As for inflation it is expected to rise toward the end of the year before it moderates in the course of 2025. Hungarian central bank slashed the growth forecast for 2024 and 2025 Romania placed RON 500 million of 2026 government papers.

Download The Full CEE Macro Daily

Author

Erste Bank Research Team

Erste Bank

At Erste Group we greatly value transparency. Our Investor Relations team strives to provide comprehensive information with frequent updates to ensure that the details on these pages are always current.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.