Both Hungarian and Czech GDP came out strong. The Polish inflation data are scheduled for release

Headlines
 - Polish inflation might have reached 4.5% in April
 - Czech GDP rose 2.5% y/y in Q1/2011

Both forex and fixed-income markets eyed GDP figures and the CNB Minutes from the latest central bank meeting. The released GDP report has been basically in-line with expectations as the economy grew by 0.6 % q/q and 2.5% y/y. Concerning the CNB Minutes, they have showed the balance approach of the Bank Board, with slightly dovish bias. For instance the Minutes showed that the Board still does not see demand-pull inflation pressures in the domestic economy, while it was said that “the appreciating exchange rate was attenuating the transmission of inflationary pressures from abroad and that monetary policy could be easier”.
This last sentence might be an explanation of the very recent weakening of the koruna as the EUR/CZK rate has bounced to the 24.37 level this morning.


The Hungarian forint was hurt yesterday by the volatility on commodity markets. This morning however stronger GDP growth gave support to the currency at the 267.00 level, which is also the 50-day moving average. Growth accelerated to 2.4% Y/Y in the first quarter, up from 1.9% Y/Y at the end of last year. The Q/Q change rose to 0.7% suggesting that the economy may deliver this year’s 3% growth rate projection. Naturally, strong growth in Europe helps the Hungarian economy, while domestic demand have likely remained subdued.


The Polish zloty was digesting surprising rate hike yesterday. The EUR/PLN currency pair edged slightly higher and remained between 3.92 EUR/PLN and 3.93 EUR/PLN during the most of the session.
Polish central bankers are unusually quiet after Wednesday’s hike. The reason might be that we are still waiting for the figure on April’s inflation (which is due today). We expect that the inflation rose to 4.5% y/y last month. As in previous months, main drivers of inflation should be commodities prices. Nevertheless, NBP already raised interest rates and hence responded to increasing inflation pressures. On the other hand, the Monetary Policy Council’s members just showed us they were not afraid to surprise markets.