7 May 2014
EMEA EM Express: Polish and Czech central banks on hold in May, as expected
FXStreet (Łodź) - Both the Polish and the Czech central banks, which held their monetary policy meetings on Wednesday decided to keep their interest rates steady at 2.5% and 0.05%, as widely expected.
The Polish central bank, NBP, will comment on the decision at a press conference scheduled for 14 GMT. Cristian Maggio, Senior Emerging Markets Strategist at TD Securities, who expects the bank to maintain its neutral-to-dovish stance, with governor Marek Belka reiterating “the forward guidance until end-Q3.”
“He should also highlight the downside risks to inflation and GDP growth stemming from the Russo-Ukrainian crisis. In addition to this, Belka may focus on tomorrow’s ECB rate announcement, linking a possible ECB decision to cut rates in the near future to the implications for Poland’s monetary policy.”
When announcing its monetary policy decision, the Czech central bank pledged to keep the koruna from appreciating further, beyond 27 per euro, in the face of inflation remaining close to zero and a pickup of economic activity in the country. The bank held rates steady at 0.05% for the twelfth consecutive month.
Meanwhile, the tensions in Ukraine continued to simmer on Tuesday and Wednesday. Pro-Russian demonstrators seized another government building in Ukraine, the city hall in the southern city of Mariupol. Clashes continued in Slaviansk. Despite warnings from various Western and Ukrainian politicians that Moscow is kindling unrest in Ukraine in order to derail the upcoming elections on May 25, the markets don't seem to be overly concerned.
“Risk perception has fallen, with CDS spreads tightening even for countries like Russia that still face significant risks from the escalation of the Ukrainian crisis,” Cristian Maggio points out. “Curves have consequently bull flattened last week.”
Should the situation escalate it could “potentially reverse the low vol environment, inducing investors to rethink their long-short strategies, and leading to the suppression of the carry trade momentum,” the analyst adds.
On Tuesday the IMF sent Ukraine the first part of the 17 billion dollar loan granted earlier and amounting to 3.2 billion dollars. According to reports Ukraine's National Bank Chairman Stepan Kubiv informed that 1 billion dollars would be used to boost gold and currency reserves while “the remainder will go to the budget to stabilize the macroeconomic and financial situation in Ukraine.” This raised concerns over whether the money will be used for the most pressing needs.
Zero Hedge comments: “We presume Gazprom still gets its payment and bondholders get paid off - because that seriously impair 'investor confidence' which is, as they note below, is what is crucial to stabilize the nation's economy...”
Economic data
On Tuesday the Russian Federation Federal State Statistics Service informed that monthly inflation in the country slowed down to 0.9% in April from 1% in March, in line with forecasts. Year-on-year CPI jumped from 6.9% to 7.3%, the highest reading in 11 months.
Dmitry Polevoy from ING believes that headline CPI should reach the “7.5-7.7% mark before falling to slightly above 6% by year-end.” The analyst adds that “6% has been set as the new realistic goal of the CBR for 2014 vs its initial unrealistic target of 5%. So, any monetary policy easing looks quite distant, from our view, and is not on the agenda of the CBR this year.”
Ukraine saw a considerable increase in CPI and PPI. The country's inflation accelerated in March to 3.3% from 2.2% on a monthly basis and from 3.4% to 6.9% on an annual basis. Meanwhile, April PPI grew to 6.1% from 2.7% month-on-month and to 7.5% from 3.9% year-on-year.
“Inflation will easily be above the 10% mark at end-2014 as a pay for the IMF stand-by loan and nearly two years of artificial disinflation in 2012 and 2013,” Dmitry Polevoy predicts. “This will be key obstacle for consumer activity in 2014 and going forward contributing to the already recessionary environment and deepening the slump.
Hungary's Retail Sales increased by 8.3% in March year-on-year, following a 6.7% gain in February and above forecasts of rising 6.1%. According to Andras Balatoni from ING the considerable pickup is due to “increasing purchasing power of the households, rising optimism, and some methodological change.”
On Wednesday also the Czech Republic released Retail Sales data. On an annual basis the indicator grew 5.2% in March, down from the 8.1% increase in February and below consensus of +7.3%.
Russia's PMI Services recorded a slight drop in April to 46.8 from 47.7 in March.
Technicals
Following the announcement of NBP's rates decision EUR/PLN dropped towards 4.2027 , down from a daily high of 4.2065, but remains above yesterday’s close and today’s lows at 4.1959.
The Czech koruna almost didn't react to the Czech central bank's announcement, staying in the 27.42 region against the euro.
USD/RUB was down by 0.46% at 35.2355 at the moment of writing.
On Tuesday the USD/RUB daily FXStreet Trend Index was slightly bearish, with the OB/OS Index neutral. RSI was at 42 at the last close, and has dropped to 29 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 2058 pips, with ATR (14) shrinking at 3036 pips. The 1D 200 SMA was at 33.8075 , while the 1D 20 EMA was at 35.7112.
The Polish central bank, NBP, will comment on the decision at a press conference scheduled for 14 GMT. Cristian Maggio, Senior Emerging Markets Strategist at TD Securities, who expects the bank to maintain its neutral-to-dovish stance, with governor Marek Belka reiterating “the forward guidance until end-Q3.”
“He should also highlight the downside risks to inflation and GDP growth stemming from the Russo-Ukrainian crisis. In addition to this, Belka may focus on tomorrow’s ECB rate announcement, linking a possible ECB decision to cut rates in the near future to the implications for Poland’s monetary policy.”
When announcing its monetary policy decision, the Czech central bank pledged to keep the koruna from appreciating further, beyond 27 per euro, in the face of inflation remaining close to zero and a pickup of economic activity in the country. The bank held rates steady at 0.05% for the twelfth consecutive month.
Meanwhile, the tensions in Ukraine continued to simmer on Tuesday and Wednesday. Pro-Russian demonstrators seized another government building in Ukraine, the city hall in the southern city of Mariupol. Clashes continued in Slaviansk. Despite warnings from various Western and Ukrainian politicians that Moscow is kindling unrest in Ukraine in order to derail the upcoming elections on May 25, the markets don't seem to be overly concerned.
“Risk perception has fallen, with CDS spreads tightening even for countries like Russia that still face significant risks from the escalation of the Ukrainian crisis,” Cristian Maggio points out. “Curves have consequently bull flattened last week.”
Should the situation escalate it could “potentially reverse the low vol environment, inducing investors to rethink their long-short strategies, and leading to the suppression of the carry trade momentum,” the analyst adds.
On Tuesday the IMF sent Ukraine the first part of the 17 billion dollar loan granted earlier and amounting to 3.2 billion dollars. According to reports Ukraine's National Bank Chairman Stepan Kubiv informed that 1 billion dollars would be used to boost gold and currency reserves while “the remainder will go to the budget to stabilize the macroeconomic and financial situation in Ukraine.” This raised concerns over whether the money will be used for the most pressing needs.
Zero Hedge comments: “We presume Gazprom still gets its payment and bondholders get paid off - because that seriously impair 'investor confidence' which is, as they note below, is what is crucial to stabilize the nation's economy...”
Economic data
On Tuesday the Russian Federation Federal State Statistics Service informed that monthly inflation in the country slowed down to 0.9% in April from 1% in March, in line with forecasts. Year-on-year CPI jumped from 6.9% to 7.3%, the highest reading in 11 months.
Dmitry Polevoy from ING believes that headline CPI should reach the “7.5-7.7% mark before falling to slightly above 6% by year-end.” The analyst adds that “6% has been set as the new realistic goal of the CBR for 2014 vs its initial unrealistic target of 5%. So, any monetary policy easing looks quite distant, from our view, and is not on the agenda of the CBR this year.”
Ukraine saw a considerable increase in CPI and PPI. The country's inflation accelerated in March to 3.3% from 2.2% on a monthly basis and from 3.4% to 6.9% on an annual basis. Meanwhile, April PPI grew to 6.1% from 2.7% month-on-month and to 7.5% from 3.9% year-on-year.
“Inflation will easily be above the 10% mark at end-2014 as a pay for the IMF stand-by loan and nearly two years of artificial disinflation in 2012 and 2013,” Dmitry Polevoy predicts. “This will be key obstacle for consumer activity in 2014 and going forward contributing to the already recessionary environment and deepening the slump.
Hungary's Retail Sales increased by 8.3% in March year-on-year, following a 6.7% gain in February and above forecasts of rising 6.1%. According to Andras Balatoni from ING the considerable pickup is due to “increasing purchasing power of the households, rising optimism, and some methodological change.”
On Wednesday also the Czech Republic released Retail Sales data. On an annual basis the indicator grew 5.2% in March, down from the 8.1% increase in February and below consensus of +7.3%.
Russia's PMI Services recorded a slight drop in April to 46.8 from 47.7 in March.
Technicals
Following the announcement of NBP's rates decision EUR/PLN dropped towards 4.2027 , down from a daily high of 4.2065, but remains above yesterday’s close and today’s lows at 4.1959.
The Czech koruna almost didn't react to the Czech central bank's announcement, staying in the 27.42 region against the euro.
USD/RUB was down by 0.46% at 35.2355 at the moment of writing.
On Tuesday the USD/RUB daily FXStreet Trend Index was slightly bearish, with the OB/OS Index neutral. RSI was at 42 at the last close, and has dropped to 29 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 2058 pips, with ATR (14) shrinking at 3036 pips. The 1D 200 SMA was at 33.8075 , while the 1D 20 EMA was at 35.7112.