Despite the effort of regional central banks to ease monetary conditions, Central European currencies have been extending their gains. The firming results from positive sentiment in global (risky) markets rather than from supportive domestic news. In this respect, let us recall recent poor GDP readings from the Czech Republic and Hungary, which will be probably followed by a similarly disappointing report from Poland tomorrow.
Besides forex markets, positive developments can be observed also on local fixed income markets – namely in the high yielding Hungarian and Polish markets. Both latter markets have priced in huge cuts in central banks’ official rates. Hungarian and Polish FRA rates have also priced in three to four 25 bps rate cuts in the 9-months horizon, which looks fairly optimistic - especially in the Polish case. Talking about local fixed-income markets, we should not forget favourable situation of regional treasuries that can be sold on other than local bond markets. Let us also mention the latest news from Hungary, where the government prepares issuance of a foreign currency bond on international markets. The date of the depends on further progress of the EU/IMF talks, however, the state secretary Gyula Pleschinger said that the probability of issuance this year was very little.