CEE: NBP to confirm hawkish turn
This morning, the monthly data set was released in the region. We had retail sales data in Romania and retail sales and industrial production in Hungary, all for October. Here we highlight the industrial sector, which fell by 2.8% YoY, below market expectations. Later this morning, we'll see retail sales in the Czech Republic, which should confirm a weak economy in the fourth quarter as well.
Later today, we will see a decision from the National Bank of Poland (NBP). We expect rates to remain unchanged, as in November. So, the main event here will be the governor's press conference tomorrow. But today, we'll still see a statement that should confirm the central bank's hawkish turn last month.
The Polish zloty is slowly but steadily moving towards stronger levels, and we think that the current market conditions justify the level of 4.320 EUR/PLN. However, PLN rates have followed the fall in core rates, which in our view gives more opportunity for rates to react to the hawkish tone of the central bank – and we should see some upward repricing over the next two days especially at the short end of the IRS curve. This should support PLN and we should see more gains and move towards 4.300 EUR/PLN by the end of the week.