News
HU: Mixed – NBH hikes policy rate by 50bp to 7.00%, statement is a tad less hawkish than last time but multi week outlook strongly depends on the IMF/EU talks (p1)
LT: Positive – 3Q C/A comes in at LTL 0.6bn, FDI records another strong positive quarterly reading (p2)
Today’s Events
CZ: Policy rate decision / CR: Nov unemployment / LT: Nov IP / LV: Nov PPI / RU: Weekly CPI / SK: Oct C/A, Nov unemployment
EEMEA Markets
* CEEMEA markets are opening firmer as the positive mood continues from last night. EUR/HUF is back below 300, EUR/PLN is finally through the 4.44 level whilst TRY is catching up to the ZAR. The CBT is increased the FX auction size once again with USD1.7bn on offer at today’s and tomm’s FX auctions. Apart from this all eyes will be on the take up of the ECB 36month LTRO operation.
* NBH remains in a challenging position – stay positioned for further short squeeze: At its last meeting of the year, the NBH MPC hiked interest rates to 7.0% from 6.50% in line with market consensus but against our call of no change. According to NBH Governor Simor, the MPC also discussed a 25bp rate hike. We still believe that the multi-week outlook of the Hungarian markets strongly depends on the outcome of the forthcoming IMF/EU negotiations and the rate hike in itself will not change the potentially very negative consequences in the event those talks fail. From here our baseline assumes unchanged rates until the end of 2012, but this also incorporates an IMF/EU agreement reached in 1Q12. The post rate hike price action in FX clearly suggests that the market is still very short HUF, and we would remain positioned for a further short squeeze via EUR/HUF puts as one of our top trades for 2012 (particularly for 1Q).
* CNB rate decision in focus – stay long PLN/CZK with 5.90 target: today the Czech National Bank will announce its rate decision at 13.00pm CET. We and market consensus expect unchanged rates. Although CNB Board members recently issued comments about the negative impact of weaker CZK we believe at the end of the day this is on the only central bank which should not worry about weaker or at least stabilizing currency performance (whilst the others favour stronger FX). Against this backdrop we recommended a long PLN/CZK at 5.65 (in our CEE Quarterly publication, Dec 12) as one of our top trades for 2012. In the last 1.5weeks the cross moved about 1.3% in our favour and we continue to target 5.90.
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http://www.easyforexnews.net/wp-content/uploads/2011/12/EEMEAdaily201211.pdf
Gyula Toth
UniCredit Research