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15 May 2014
EMEA EM Express: Hungarian and Polish GDP numbers surprise to the upside in Q1
FXStreet (Łódź) - Peace talks between Ukrainian and Russian officials initiated by the Organization for Security and Cooperation in Europe on Wednesday, remained in limbo as none of the pro-Russian militants attended the meeting in Kiev. Meanwhile, Ukrainian forces continued their operation in the eastern parts of the country, destroying two military bases of the separatists.
On Thursday Polish PM Donald Tusk said that the conflict in Ukraine was more serious than the EU crisis and stressed that it was Moscow who was fueling it, not Kiev. He also called for an increased NATO presence in Eastern Europe.
Anti-government protests have also returned to Turkey, following the death of nearly 300 miners in a mine fire in Soma and the insensitive reaction of various officials including PM Recep Tayyip Erdogan. In the opinion of the BBH Global Currency Strategy Team however, the situation shouldn't „lead to any short-term developments beyond what we are already seeing, and are unlikely to spark protests of the magnitude of those seen last year.
Economic data
Today's string of preliminary GDP releases for the first quarter of the year kicked off in the European morning with the Czech Republic revealing that on a quarterly basis it had stagnated in Q1, after growing 1.9% in Q4, but still beating expectations of a 0.2% drop.
On an annual basis Hungary grew 3.5%, up from 2.7% and above expectations of +2.7%. Polish quarterly data was also solid at +3.3%, following a 2.7% increase and beating forecasts of a 3.1% rise.
Jacqui Douglas states that the Hungarian numbers were “very surprising” and attributes them to “a strong contribution from the public sector, which also reflected in an extraordinarily strong momentum in job creation.” She warns however that “our models that track GDP through leading indicators already anticipate a visible slowdown in Q2, which could make the current strength in economic activity not sustainable.”
As for the Polish GDP data, Jacqui Douglas notes that similarly as in the case of Hungary, “the strong print does not reflect just base effects,” and that in fact “sequential GDP expanded by a sound 1.1%.”
Also on Thursday Poland released Current Account and Net Inflation data. The current account defict shifted to a €517M surplus in March from a €-572M deficit in February, against consensus of narrowing to €-205M. Meanwhile, April Net Inflation slowed down to 0.8% from 1.1% seen in March.
Turkey informed that the Quarterly 3-month Jobless Average climbed slightly to 10.2% in February, from 10.1% in January and against projections of remaining unchanged. The Turkish budget deficit narrowed to TRY -2.7B in April from TRY -5.1B in March.
Technicals
Following the release of Hungary's GDP numbers EUR/HUF fell sharply bu almost 0.5%, “suggesting that the NBH will have more leeway to ease rates at the next meeting,” in the opinion of Jacqui Douglas. The analyst also points out that “differently from the HUF, however, the PLN reaction was less strong, as zloty appreciation pre-empted the official release having moved in sympathy with the forint over the previous hour.”
Still, the zloty strengthened against the euro the most since March 27 on Wednesday. Yields on 10-year government bonds dropped by 8bp to an 11-month low of 3.66%. USD/PLN was up 0.19% at 3.0600 at the moment of writing.
USD/HUF was rising 0.37% at 222.0700. Yields on government bonds decreased by 14bps to 4.83%, the lowest since 1999.
On Thursday Polish PM Donald Tusk said that the conflict in Ukraine was more serious than the EU crisis and stressed that it was Moscow who was fueling it, not Kiev. He also called for an increased NATO presence in Eastern Europe.
Anti-government protests have also returned to Turkey, following the death of nearly 300 miners in a mine fire in Soma and the insensitive reaction of various officials including PM Recep Tayyip Erdogan. In the opinion of the BBH Global Currency Strategy Team however, the situation shouldn't „lead to any short-term developments beyond what we are already seeing, and are unlikely to spark protests of the magnitude of those seen last year.
Economic data
Today's string of preliminary GDP releases for the first quarter of the year kicked off in the European morning with the Czech Republic revealing that on a quarterly basis it had stagnated in Q1, after growing 1.9% in Q4, but still beating expectations of a 0.2% drop.
On an annual basis Hungary grew 3.5%, up from 2.7% and above expectations of +2.7%. Polish quarterly data was also solid at +3.3%, following a 2.7% increase and beating forecasts of a 3.1% rise.
Jacqui Douglas states that the Hungarian numbers were “very surprising” and attributes them to “a strong contribution from the public sector, which also reflected in an extraordinarily strong momentum in job creation.” She warns however that “our models that track GDP through leading indicators already anticipate a visible slowdown in Q2, which could make the current strength in economic activity not sustainable.”
As for the Polish GDP data, Jacqui Douglas notes that similarly as in the case of Hungary, “the strong print does not reflect just base effects,” and that in fact “sequential GDP expanded by a sound 1.1%.”
Also on Thursday Poland released Current Account and Net Inflation data. The current account defict shifted to a €517M surplus in March from a €-572M deficit in February, against consensus of narrowing to €-205M. Meanwhile, April Net Inflation slowed down to 0.8% from 1.1% seen in March.
Turkey informed that the Quarterly 3-month Jobless Average climbed slightly to 10.2% in February, from 10.1% in January and against projections of remaining unchanged. The Turkish budget deficit narrowed to TRY -2.7B in April from TRY -5.1B in March.
Technicals
Following the release of Hungary's GDP numbers EUR/HUF fell sharply bu almost 0.5%, “suggesting that the NBH will have more leeway to ease rates at the next meeting,” in the opinion of Jacqui Douglas. The analyst also points out that “differently from the HUF, however, the PLN reaction was less strong, as zloty appreciation pre-empted the official release having moved in sympathy with the forint over the previous hour.”
Still, the zloty strengthened against the euro the most since March 27 on Wednesday. Yields on 10-year government bonds dropped by 8bp to an 11-month low of 3.66%. USD/PLN was up 0.19% at 3.0600 at the moment of writing.
USD/HUF was rising 0.37% at 222.0700. Yields on government bonds decreased by 14bps to 4.83%, the lowest since 1999.