CEE MARKETS-Zloty leads gains ahead of expected Q1 GDP data
BUDAPEST, May 16 (Reuters) – The Polish zloty EURPLN= firmed on Monday ahead of Tuesday’s gross domestic product (GDP) figures, which are expected to show robust growth in the first quarter amid growing headwinds for central European economies.
At 08:45 GMT, the zloty was up 0.5% at 4.6725 against the euro, outperforming the Hungarian forint EURHUF= and the Czech crown EURCZK=which gained 0.3% and 0.2% respectively.
Poland, the region’s largest economy, is expected to post economic growth of 8% in the first quarter on Tuesday, accelerating from 7.3%, while analysts expect Hungary’s growth to slow to 6.9% against 7.1% in the previous three months.
Hungary’s central bank deputy governor, however, said last week that first-quarter growth could actually top 8% in Hungary as well, signaling strong momentum ahead of an expected slowdown later this year.
“Reports from the domestic economy indicating continued good economic conditions will be a potential factor supporting the zloty, but it is global market moods that will be their primary driver,” Bank Millennium said in a note.
“These, in turn, are determined, on the one hand, by expectations of further monetary policy tightening in the United States and, on the other, by growing concerns about a slowdown in the economy.”
Rise in US rates and a stronger dollar are hitting the appetite of investors in the region. Last week, US Federal Reserve Chairman Jerome Powell reiterated his expectation of a half-percentage-point rate hike at the next two policy meetings.
After steep interest rate hikes in Central Europe since last year, fears of an end to the tightening, as in the Czech Republic, or a slowdown, as in Hungary, have started to put pressure on currencies , prompting the Czech central bank to intervene last week.
The Czech and Hungarian central banks, which last June became the first in the European Union to launch steep rate hikes to fight inflation, surprised investors last week by appearing ready to hold back, fearing a stifle economic growth.
Analysts said the comments came as a surprise as inflation continues to rise in both countries.
“As part of the war in Ukraine, there is a threat of interruption of imports of certain agricultural products and there have also been disruptions in the deliveries of certain key components of industry, in particular for car manufacturers, which may further increase price pressures,” Generali said. Investments ECO Chief Economist Radomir Jac said.
Even with Monday’s gains, the zloty and forint remain in the red for the year despite massive monetary tightening from their central banks, with the forint posting a 4% loss so far, the worst in Central Europe.
At 10:45 a.m. CET
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(Reporting by Gergely Szakacs; Editing by Rashmi Aich)
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