RO: Positive – Unemployment rate drops further to 5% at end-May (p2)
Today’s Events
HU: May Unemployment / KZ: 1Q GDP, KZT 13bn floating rate 2020 GB auction / LN: Consumer confidence / PL: 1Q C/A / RO: Policy Rate announcement / SRB: 53W RSD 20bn t-bill issue / RU: RUB 20bn 2015 and RUB 50bn 2017 auction, CPI YTD, (29-30/06) 1Q C/A / UA: (29-30/06) 1Q GDP
EEMEA Markets
All eyes will be on the Greek austerity vote today and we expect volatile and light trading in EEMEA markets until the announcement. With the somewhat bullish close of the US equity markets and EUR/USD not far from the 50 day moving average we believe the market and EM is poised for a further rally in the near term once the result is announced.
In EEMEA we will watch three key events today:
First, Poland will publish final 1Q C/A data where revisions to net errors and omissions will attract most of the attention. We envisage that roughly half of last year’s 3.7%/GDP net errors and omissions will be reallocated to the current account balance whilst other items will moved into the financial account. As these flows are already behind us we do not think that the announcement should have any real negative impact, moreover the removal of some uncertainty could lead to a relief rally in PLN (particularly if the Greek vote goes according to expectations). On the other hand, with both the budget and current account deficit around 6%/GDP the longer term assessment of the Polish economy might change. We nevertheless maintain our view that PLN should outperform as the uncertainty is removed whilst local newsflow is still relatively hawkish. We hence maintain our long PLN/HUF recommendation.
Second, the National Bank of Romania will hold a rate meeting today. We expect rates to remain unchanged at 6.25% but would watch for any comments regarding the recent RON deprecation and potential remarks on financial stability. On balance we still favor RON at current levels as an RV trade and maintain the long RON/HUF position we entered last week at 63.10 with a target of 65.25.
Third, we will keep an eye on the Russian OFZ auction where the MinFin will try to sell RUB 70bn paper (RUB 20bn 2015 and RUB 70bn 2017). The yield guidance is below yesterday’s secondary market levels for both papers. The guidance is at 7.75/85% for the 2017 OFZ vs. 7.95% secondary market level and 7.05/10% for the 2015 OFZ vs. 7.15% secondary market level. We note that the 2017 OFZ is trading around 15bp wider vs. its issuance at the beginning of June.
Gyula Toth
UniCredit Research