News
KZ: Positive – Industrial output up 4.7% in May yoy, 5.8% in Jan-May and down 0.9% mom sa (p2)
TK: Negative – April 2011 C/A posts USD 7.7bn deficit (p2)
SK: Negative – May CPI comes in at 4.0 % yoy (p2)
Today’s Events
BU: May CPI / CZ: April C/A / CR: HRK 500mn and EUR 5mn t-bill auctions / HU: HUNGB 3M t-bill auction / KZ: KZT 10bn 2015 GB auction / PL: April C/A / RO: April C/A / SRB: RSD 10bn 53 week t-bill auction (re-opening) / RU: 1Q GDP (Prelim) / UA: April Merchandise Trade
EEMEA Markets
Turkey – C/A deficit jumps to new high (8.3%/GDP) in April. The April current account balance (CAD) posted a USD 7,680mn deficit (+75.8%, yoy) which is slightly below the average market estimate of USD 7.8bn. On 12M terms, Turkey’s CAD reached USD 63.7bn, roughly corresponding to a new peak of 8.3% of GDP and up from YE10 of 6.6% (see inside for details). Meanwhile, the market reaction on the election outcome was mixed. Although the TRY started the day on a firm footing it gave back all the gains later in the day and closed around 1.92 vs. the basket still some 2% off the recent highs. We believe the market could try to go long the lira or at least cut short positions on the fact that the seat distribution could force the AKP to seek support from the now stronger opposition in its push for a new Constitution perhaps including a shift to a presidential system, which should be regarded positively by the markets. The market is still calling for a mild rate hike from the CBT in late 3Q11 or in 4Q11, especially now that the elections are out of the way.
Serbia – new issuance schedule pushes EUR/RSD higher: According to which there will be a plain EUR paper instead of EUR indexed. The size of the 53W auction has also been increased from RSD 10bn to RSD 20bn. It has been moved from 28 to 29 June, thus matching the settlement of this auction (1 July) with the maturity of EUR indexed. EUR/RSD spiked more than 2% on the news given this could potentially mean EUR 200mn selling of RSD. This, coupled with the rate cut last week, suggests that policymakers are becoming increasingly serious about slashing RSD gains amid growing signs of economic slowdown and ongoing tensions in the Greek banking sector. Separately, NBS Governor Soskic reiterated that the time has come to cut rates, which is also supported by the slowing inflation rate from present levels. We believe the current level of t/bill rates will continue to attract heavy non/resident flow amid falling G3 rates but see this increasingly translating into yield compression vs. FX gains.
Poland – C/A data in focus: today the market will be watching the Polish April current account data, which should shed some light on the net errors ahead of the end June revision. For the time being we remain short EUR/PLN but intend to pull the stop loss on this trade as we get closer to the end of the month.
UniCredit Research