The second half of the month usually brings fewer releases in the economic calendar, and this week will be rather muted. Today, January inflation in Romania will be published, as the last number in the region. We expect only a slight decrease from 9.7% to 9.4% YoY.
On Tuesday, the National Bank of Romania will hold its first meeting of the year, leaving rates unchanged at 6.50%. The central bank is waiting for a widely expected decline in headline inflation in the summer months due to the base effect from last year’s tax increase. Therefore, we expect the central bank to return to rate cuts in May at the earliest, which is supported by the weaker GDP numbers released on Friday. On Thursday, a set of monthly data for Poland will be published, including the labour market and industry. And on Friday, we will see the numbers in industry in Romania.
Last week did not see much movement in CEE outside the usual ranges, except for the forint. And this week does not indicate that we should see more action here either. While a weaker US dollar supports stronger CEE currencies, rising expectations of rate cuts across the region keep FX broadly stable. Therefore, we expect EUR/PLN and EUR/CZK to remain in the 4.200-4.230 and 24.200-400 ranges. EUR/HUF has seen some upward correction after hitting new two-year lows last week, but we expect the forint to remain supported by pre-election positioning, and any weakness will be used by the market for new HUF longs, in our view.
At the same time, Thursday’s inflation last week confirmed that the NBH may cut rates as early as next week’s meeting, which will moderate the forint’s gains from previous weeks.
Frantisek Taborsky
