This week in the region will focus on global history, but we will still see some interesting figures and central bank speakers. Today in the Czech Republic the PPI figures will be published, the last data before the CNB meeting next week. In Poland we will see core inflation in August. Our economists expect a decline of 10.6% to 10.0% year-on-year, slightly below market expectations. On Wednesday we will know the figures for industrial production, PPI and the labor market in Poland. The industry is likely to record another 2.5% year-on-year decline in August, more than the market expects. And on Thursday we will see retail sales in Poland. Also on Thursday the Turkish central bank meets and we expect another rate hike of 25% to 30%, following a surprisingly large rate hike in August.
We should also hear from some central bank speakers this week. In the Czech Republic, the blackout period before the September meeting begins this week on Wednesday, so we expect more speakers in the media in the coming days. We already heard from some last week. More recently, the CNB governor said over the weekend that markets should soon forget about rate cuts. Also in Hungary, the central bank is reaching a breaking point and we could hear more from central bankers in the second half of the week. Regarding the sovereign rating, Moody’s will publish a review of Poland on Friday. However, this time this should not be an event.
In the forex market, we saw confirmation of weaker levels for ECO last week and it is difficult to see much change this week. On the other hand, the market appears to have already built strong short positions in the Czech crown and Polish zloty. Therefore, we could see some new gains in the Czech crown after a CNB rejection against the dovish market prices. This could push the krona back towards 24.50 EUR/CZK. Furthermore, market rates in Poland indicate that we should not see further weakness this week but rather a stabilization around the current 4.65 EUR/PLN. However, EUR/USD will of course take center stage in the second half of the week and will be the main driver.
Frantisek Taborsky
