News
BG: Mixed – C/A balance in April reaches 0.6% of GDP (p2)
HU: Dovish -May CPI surprises on the downside at 3.9% yoy from 4.7%yoy (p2)
PL: Hawkish – May CPI accelerates to 5.0%yoy from 4.5%yoy (p2)
TK: Negative – May budget surplus declines by 51%yoy (p2)
Today’s Events
HU: HUF 20bn 2014, HUF 15bn 2017 , HUF 10bn 2022 HUNGB auction / PL: May Unemployment, May Wages / RO: RON 600mn 2016 ROMGB auction / SRB: RSD 2bn 6M t-bill auction / RU: CPI YTD as of June, 13; May IP; Int Reserves as of June, 10 / SK: May CPI / TK: May Consumer Confidence / UA: May IP
EEMEA Markets
The key event yesterday was undoubtedly the major divergence observed in the Polish and Hungarian May CPI. From historical perspective the 1.1pct difference between the headline inflations is all time high level. Although both headline inflation were affected by methodology change (Polish was up by 0.2pct and the Hungarian down by 0.1pct) even excluding these the divergence is significant. Core inflation developments also show similar picture, while the Hungarian remained unchanged at 2.7%yoy the Polish accelerated to 2.5%yoy from 2.1%yoy.
Although one can argue that the Polish inflation should slow from the current levels we believe the major difference is simply the very different underlying inflation pressure. Whilst Hungarian household demand is contracting the Polish household demand is the major driver of GDP growth. We believe at the end of the day this could have an impact on relative currency performance in the coming 3months. From this perspective long PLN/HUF looks appealing.
Today the Hungarian and Romanian bond auctions will be the key sentiment test amid clearly deteriorating risk appetite backdrop. Hungary will auction the usual amount of HUF45bn long end HGBs whilst Romanian will try selling RON600mn 5y papers. We remain constructive on the later but will keep a close eye on the Greek developments which might negatively affect the Romanian sentiment through the banking sector channel.
Gyula Toth
UniCredit Research