On Monday, Central European currencies posted small gains as they took advantage of a slightly stronger common currency. Apart from that, a positive mood related to upcoming Hungary and IMF/EU talks supported regional assets in general and Hungarian bonds in particular. Both IMF and EU criticized especially new laws which might curb the central bank’s independence. A sharp rise in bond yields in the end of previous year persuaded Hungary’s Economy Ministry to scrap some of planned bond auctions recently and put an additional pressure on Orban’s administrative.
Meanwhile, preliminary data showed that Hungary’s cash-flow deficit for 2011 ended 10 percent above the target. Nevertheless, the Economy Ministry said the overall ESA 95 deficit (i.e., under EU accounting rules) could reach this year’s target slightly below 3 % of GDP.
Regarding the outlook, Hungary’s discussions about new credit line will probably remain this week’s regional eye-catcher (according to Reuters, informal talks have already started). Beside that it is worth to remind that Poland’s central bank decision on interest rates is due to tomorrow and inflation figures for Poland and Hungary will be released on Friday.