CEE currencies extended rally on positive US payrolls figures and subsequent gains of global equity markets. EUR/CZK moved back below crucial 25.00/25.015 level and EUR/PLN stays below 4.2 and 200-day moving average. For the week ahead the crucial question is whether this breakthrough is sustainable or the rally starts to loose the steam. A lot of should depend on the outcome of Greek talks.
From regional perspective the Czech industrial output met our expectations with pretty solid 2% y/y growth. Structure of the growth is obviously more disturbing. It is still solely the car industry that is booming and the remaining sectors (with the exception of machinery) are either declining or stagnating. Nevertheless the booming car industry should contribute to very favourable trade balance figures, set to be released tomorrow.
Looking further ahead, the National Bank of Poland (NBP) is unlikely to change rates on Wednesday. Although the market bet on a rate cut within a nine-month horizon as recently as the beginning of the year, the news from the last meeting as well as central bankers’ comments have made it fairly clear that rates are unlikely to change soon. According to a preliminary GDP forecast for last year, the Polish economy grew by 4.3%, in spite of rate hikes in the first half of the year, and the start of 2012 was also very good – January’s PMI surprised the market very positively (the third largest increase in the history) Thus, the NBP may be primarily afraid of an increase in households’ inflation expectations; however, this should be partly eliminated by the strengthened Polish zloty.
EUR/CZK moves below the key 25.00 level