CEE currencies strengthened significantly yesterday with the Hungarian forint outperforming its regional peers. The forint hit the 5-week at 296.20 EUR/HUF. Also the Polish zloty and the Czech koruna performed well and gained 0.8 % and 0.3 %, respectively. However, the gains were owing to improving global risk sentiment rather than positive domestic events. Last week’s surprising Bank of Japan´s announcement of massive monetary easing raised appetite for high yielding assets, including the Central European ones. In Hungary, positive global sentiment overshadowed even the news about resignation of Hungarian central bank deputy governor Júlia Király. Király’s six-year term would have expired in July and her resignation can be interpreted rather as a demonstration of her attitude to the new NBH’s leadership and orientation of the central bank than anything else.
Today, fresh Czech inflation data have been released. The March figures did not surprise, prices rose 1.7% y/y, at the same rate as in February. Inflation has stayed below the CNB target for the third month in a row, in spite of the January increase of both VAT rates. Low CPI confirms that weak domestic demand still offers little space for retailers to push prices up. Given that inflation data matched median estimates, we do not expect significant market reaction.