FX, stocks rebound ahead of ECB policy meet

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PRAGUE — Central European currencies rebounded on

Thursday from losses marked this week as investors’ risk aversion eased and

market focus turned to the European Central Bank (ECB), which is expected to

keep its stimulus taps fully open.

While the ECB remains dovish and looks certain to promise an even longer

period of stimulus on Thursday to back commitment to boost inflation, strong

price pressures in central Europe have already prompted the Hungarian and Czech

central banks to raise interest rates, with more moves expected.

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Poland is yet to join the group, although analysts are waiting for cues it

could also turn to tighter policy sooner rather than later.

The zloty – under pressure this week like other units in central Europe by

concerns over the relentless surge in coronavirus cases worldwide – lagged gains

seen by the Hungarian forint and Czech crown this year.

On Thursday, the zloty led the region higher, strengthening 0.2%

to 4.578 to the euro by 0842 GMT.

“The risk of another wave of pandemic, as well as lower expectations for

domestic rate hikes suggest that the EUR/PLN pair will remain above 4.50 until

the end of the summer holidays,” ING said.

“Later in the year, however, we expect the zloty to strengthen. We believe

that elevated inflation may prompt the (Polish central bank’s) MPC to raise

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rates in the coming months.”

Stock indexes in the region that hit record or multi-year highs in the past

month also rebounded with global stocks on bets of a dovish ECB.

Currencies found support from the euro – the region’s reference currency –

which stabilized off 3-1/2-month lows before the ECB meeting later due in the

day.

Any boost for the euro after the ECB could add to strengthening in the

region, a Prague dealer said.

The crown was up at 25.64 per euro, trailing its 30-day moving

average of 25.57.

The forint inched up 0.1% to 359.35 to the euro, aided by hawkish

comments from its central bank. Deputy Governor Barnabas Virag told financial

news website portfolio.hu in an interview published on Thursday that the bank

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would continue its cycle of rate rises.

The forint has stuck in a tight range around 360 in recent trading and

dealers say it will likely hang there until the Hungarian central bank meets

next week.

CEE SNAPSHOT AT

MARKETS 1042 CET

CURRENCIES

Latest Previous Daily Change

bid close change in 2021

EURCZK Czech 25.6400 25.6900 +0.20% +2.30%

= crown

EURHUF Hungary 359.3500 359.6900 +0.09% +0.94%

= forint

EURPLN Polish 4.5775 4.5872 +0.21% -0.40%

= zloty

EURRON Romanian 4.9245 4.9244 -0.00% -1.21%

= leu

EURHRK Croatian 7.5290 7.5245 -0.06% +0.25%

= kuna

EURRSD Serbian 117.5300 117.6050 +0.06% +0.03%

= dinar

Note: calculated 1800

daily from CET

change

STOCKS

Latest Previous Daily Change

close change in 2021

.PX Prague 1195.95 1188.120 +0.66% +16.43

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0 %

.BUX Budapest 47933.71 47882.56 +0.11% +13.84

%

.WIG20 Warsaw 2251.02 2241.97 +0.40% +13.46

%

.BETI Buchares 11916.15 11913.24 +0.02% +21.52

t %

.SBITO Ljubljan 1133.93 1132.15 +0.16% +25.87

P a %

.CRBEX Zagreb 1917.01 1918.48 -0.08% +10.22

%

.BELEX Belgrade 772.39 770.59 +0.23% +3.18%

15

.SOFIX Sofia 565.92 563.18 +0.49% +26.45

%

BONDS

Yield Yield Spread Daily

(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year 1.4230 0.0040 +214bp +0bps

RR s

CZ5YT= 5-year 1.6380 -0.0230 +232bp -3bps

RR s

CZ10YT s

Poland

PL2YT= 2-year 0.4080 0.0250 +112bp +2bps

RR s

PL5YT= 5-year 1.0880 0.0010 +177bp +0bps

RR s

PL10YT s

FRA

3×6 6×9 9×12 3M

interba

nk

Czech

Hungary

Poland

Note: FRA quotes are

for ask prices

****************************************

**********************

(Reporting by Jason Hovet in Prague, Alicja Ptak in Warsaw, and Anita Komuves

in Budapest, Editing by Sherry Jacob-Phillips)

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