In Central Europe, significant economic indicators are expected to shape the region's financial landscape in the coming weeks. The Czech Republic will release its final third-quarter GDP figures, anticipated to remain steady at 1.3% year-over-year. Meanwhile, Poland will unveil December’s inflation data, with projections pointing towards a slight increase from 4.7% to 4.9%. Additionally, the Czech National Bank's December meeting minutes will provide insights into the voting dynamics surrounding interest rates, while the Polish zloty and Czech koruna continue to be influenced by rate expectations. The Hungarian forint also shows signs of weakening, reflecting broader regional trends.
Czech Economic Outlook: GDP Growth and Monetary Policy Shifts
The Czech economy is set to reveal its final third-quarter GDP growth, which economists predict will hold steady at 1.3% compared to the previous year. This stability comes as the Czech National Bank releases the minutes from its December meeting, where two board members advocated for a rate cut. Despite the pause in the cutting cycle, the meeting's discussions may hint at both dovish and hawkish perspectives, potentially surprising the market with softer stances. Furthermore, the state budget deficit for the past year is expected to be lower than initially projected, improving to 1.9% of GDP this year.
The Czech National Bank's upcoming decisions will heavily depend on January's inflation numbers. While the market currently prices in a more aggressive stance, the likelihood of rate cuts in February appears higher than anticipated. Given the low EUR/CZK exchange rate, analysts have adopted a cautious outlook on the Czech koruna. The Ministry of Finance will also publish the financing strategy for the year, including the calendar for government bond issuance in January, further influencing monetary policy expectations.
Poland and Hungary: Inflation and Currency Dynamics
Poland will announce its December inflation figures, with consensus estimates pointing to a rise from 4.7% to 4.9% year-over-year. The wide range of predictions suggests uncertainty, but the market leans toward an upward trend. The Polish zloty remains stable relative to the Czech koruna, as it closely tracks interest rate movements. Analysts believe that current market pricing reflects fair value for the zloty, unlike the overly hawkish sentiment surrounding the Czech currency.
In contrast, the Hungarian forint saw a 0.5% gain against the euro yesterday, returning to higher levels. However, the gap between interest rates and foreign exchange markets, widened by the central bank's interventions to stabilize the market at year-end, is expected to narrow. Despite some resilience, the forint still faces potential weakening pressures, leading to a negative outlook on the currency. Overall, the region's currencies will continue to be influenced by inflation trends and central bank policies.