Yesterday the Polish zloty led CEE currencies‘ loses. Zloty eased on Monday by 0.5% after the relatively hawkish NBP member Adam Glapinski admitted, that the central bank could cut rates in June further to help Polish economy to recover.
Today the publication of Hungarian CPI data did not surprise despite the fact that Hungarian inflation in April dipped to all-time-low. In annual terms prices grew by 1.7% compared to 2.2% y/y in March, which is far below NBH’s target of 3%.
Closer look to the data shows that while the rise in food prices and clothing was due to usual seasonal changes, motor fuels prices decreased compared to previous month by 1.7%. After the administrative electricity price cut in February, in April electricity prices did not change compared to March. Low inflation was widely expected and only strengthens already priced in expectation of further rate cut.
From the market point of view more interesting will be tomorrow’s data releases - Hungarian and Czech GDP and the Polish inflation. These data can hardly support the regional currencies. While Polish inflation will probably confirm expectations of further monetary easing, GDP figures should fit into the picture of the weak Czech and Hungarian economies. Regarding the Czech koruna we believe that the currency is likely to remain under the pressure in forthcoming 2 weeks. In May the CNB worsened its growth forecast (-0.5 % and 1.8 % in 2013 and 2014 respectively), while the inflation outlook remains basically the same. If the macroeconomic releases does not surprise positively, which we do not expect (our GDP forecast for 1Q2013 is slightly lower than the market consensus) any significant strengthening of the Czech koruna will be jeopardized by possible intervention from the Czech national bank.