CEE MARKETS-Forint leads region higher as investors eye cenbank meeting

By Krisztina Than BUDAPEST, March 28 (Reuters) - The Hungarian forint led Central European currencies higher on Tuesday, ahead of the central bank's rate meeting where it is expected to leave interest rates unchanged at the EU's highest level, amid stubbornly high inflation and fast wage growth. The forint was up 0.7%, as of 0900 GMT, to 384.35 to the euro, still stuck in a range between 383 and 390. "If the Hungarian central bank highlights uncertainties about (global) financial stability, the forint may strengthen somewhat, as high interest rates may persist for a long time," brokerage Equilor said in a note. "While previously we thought that the NBH could begin to ease its one-day deposit rate (18%) as early as the upcoming March MPC meeting, the deteriorating market sentiment more likely implies that the central bank will leave policy unchanged in the near-term," Goldman Sachs analysts said in a note. Hungary's annual inflation slowed marginally in February to 25.4%, while wage growth remains robust, posing upside risks to inflation, according to data published on Tuesday. Tight labour markets and strong wage growth are a pain point for central bankers across the region and is expected to translate into interest rates remaining high for longer. "Despite better news on headline, high inflation remains the key policy concern," Goldman Sachs said.

It added that while headline inflation rates are expected to fall sharply across the CEE in March and April, partly due to unusually large base effects "the outlook for core inflation remains worrying, owing to the combination of rapid wage growth and high inflation expectations." The Czech crown was flat ahead of Wednesday's rate meeting, at around 23.743 versus the euro.

"We do not expect a change to rates or the intervention pledge," CSOB said, referring to a commitment to intervene to prevent significant weakening the central bank has had in place since last May. "We actually see a chance of a light hawkish surprise."

Analysts in a Reuters poll pared back rate cut views in both Hungary and the Czech Republic. The Polish zloty , which has missed out on gains seen by the forint and crown so far this year, edged 0.2% higher to 4.682 per euro.

"This week the zloty will probably be the most stable, but also the weakest currency in the region. We expect EUR/PLN to stay close to current levels. The zloty remains unattractive for short-term investors who still prefer to take positions in other CEE currencies," ING said in a note. "Pessimism about the short-term prospects of the Polish economy will probably persist, supporting expectations for a quick easing of the NBP's policy." CEE SNAPSHO AT

MARKETS T 1003

CET

CURRENC

IES

Latest Previou Daily Change s

bid close change in 2023 EURCZK Czech <EURCZK 23.7430 23.7460 +0.01% +1.75% = crown =>
EURHUF Hungary <EURHUF 384.350 387.000 +0.69% +3.93% = forint => 0 0
EURPLN Polish <EURPLN 4.6820 4.6920 +0.21% +0.16% = zloty =>
EURRON Romanian <EURRON 4.9450 4.9429 -0.04% -0.05% = leu =>
EURHRK Croatian <EURHRK 7.5330 7.5365 +0.05% +0.05% = kuna =>
EURRSD Serbian <EURRSD 117.280 117.350 +0.06% +0.02% = dinar => 0 0

Note: calculated from 1800

daily CET

change

Latest Previou Daily Change s

close change in 2023 .PX Prague 1311.41 1298.42 +1.00% +9.13% 00
.BUX Budapest 42397.7 42096.7 +0.72% -3.19% 5 2
.WIG20 Warsaw <.WIG20 1710.22 1686.96 +1.38% -4.56% >
.BETI Buchares 12130.3 12095.6 +0.29% +4.00% t 7 3
.SBITO Ljubljan <.SBITO 1185.77 1178.91 +0.58% +13.06 P a P> % .CRBEX Zagreb <.CRBEX 2226.32 2222.29 +0.18% +747.2 > 5% .BELEX Belgrade <.BELEX 882.39 894.17 -1.32% +7.01% 15 15>
.SOFIX Sofia <.SOFIX 605.01 604.98 +0.00% +0.59% >

Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic
CZ2YT= 2-year <CZ2YT= 5.5070 -0.0640 +290bp -15bps RR RR> s
CZ5YT= 5-year <CZ5YT= 4.8790 0.0060 +259bp -8bps RR RR> s
CZ10YT <CZ10YT 4.5950 0.0250 +231bp -4bps =RR 10-year =RR> s

Poland
PL2YT= 2-year <PL2YT= 6.0240 0.0130 +342bp -7bps RR RR> s
PL5YT= 5-year <PL5YT= 6.0080 0.0260 +372bp -6bps RR RR> s
PL10YT <PL10YT 6.0770 0.0150 +379bp -5bps =RR 10-year =RR> s

FORWARD

3x6 6x9 9x12 3M interba nk Czech <CZKFRA 7.10 6.74 6.00 7.19 Rep ><PRIBO

R=>

Hungary <HUFFRA 14.40 12.62 11.59 16.30 ><BUBOR

Poland <PLNFRA 6.80 6.61 6.17 6.90 ><WIBOR

Note: are for ask

FRA prices

quotes

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(Reporting by Jason Hovet in Prague, Krisztina Than in Budapest, and Karol Badohal in Warsaw; Editing by Sonia Cheema)

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CEE MARKETS-Forint leads region higher as investors eye cenbank meeting

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