KBC: NEWS – Polish core inflation surprises on the upside

Czech Republic

The Czech koruna stayed more or less unchanged. After initial weakening it probably appreciated due to the positive developments on the euro zone peripheries, where the spreads continued to narrow. The pair came as low as 24.25 EUR/CZK this morning, but the volumes remain low.

Today we believe the Czech currency should track cautious global sentiment. The highlight of the day may be the German Ifo, which is very closely correlated with the Czech industry.

Hungary

Hungary is on track for a budget deficit of 3.8% of GDP in 2010 based on final December revenue data, which showed on Thursday that one-off taxes helped offset a spending overshoot. Markets are now looking for details of a reform plan which should address expenditure to make the government’s finances more sustainable in the long term. The reforms, scheduled in February, should trim the deficit by 600-660 billion forints according to  the government. The February  reforms will be crucial for Hungary to avert a ratings downgrade and make the country’s budget viable beyond 2012.

On Monday, the Hungarian central bank  is expected to hike rates for the third consecutive month.

Poland
 
The Polish zloty appreciated on Thursday. The EUR/PLN currency pair moved slightly higher to 3.9 EUR/PLN. The December core inflation figure, i.e. the inflation less food and energy prices (1.6% y/y vs. expected 1.4% y/y) as well as the result of PPI inflation (6.1% y/y vs. expected 5.4% y/y) surprised on the upside of expectations.

The December’s industrial production reading was slightly disappointed (11.5% y/y vs. expected 11.9% y/y). We think that rather negative global sentiment could weigh on the zloty. Hence, the zloty could post modest losses at least during the morning part of today’s session.



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January 23rd, 2011 in Forex News

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