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CEE MARKETS-FX, stocks rebound ahead of ECB policy meet

·3 min read

PRAGUE, July 22 (Reuters) - Central European currencies rebounded on Thursday from losses marked this week as investors' risk aversion eased and market focus turned to the European Central Bank (ECB), which is expected to keep its stimulus taps fully open. While the ECB remains dovish and looks certain to promise an even longer period of stimulus on Thursday to back commitment to boost inflation, strong price pressures in central Europe have already prompted the Hungarian and Czech central banks to raise interest rates, with more moves expected. Poland is yet to join the group, although analysts are waiting for cues it could also turn to tighter policy sooner rather than later. The zloty - under pressure this week like other units in central Europe by concerns over the relentless surge in coronavirus cases worldwide - lagged gains seen by the Hungarian forint and Czech crown this year. On Thursday, the zloty led the region higher, strengthening 0.2% to 4.578 to the euro by 0842 GMT. "The risk of another wave of pandemic, as well as lower expectations for domestic rate hikes suggest that the EUR/PLN pair will remain above 4.50 until the end of the summer holidays," ING said. "Later in the year, however, we expect the zloty to strengthen. We believe that elevated inflation may prompt the (Polish central bank's) MPC to raise rates in the coming months." Stock indexes in the region that hit record or multi-year highs in the past month also rebounded with global stocks on bets of a dovish ECB. Currencies found support from the euro - the region's reference currency - which stabilised off 3-1/2-month lows before the ECB meeting later due in the day. Any boost for the euro after the ECB could add to strengthening in the region, a Prague dealer said. The crown was up at 25.64 per euro, trailing its 30-day moving average of 25.57. The forint inched up 0.1% to 359.35 to the euro, aided by hawkish comments from its central bank. Deputy Governor Barnabas Virag told financial news website portfolio.hu in an interview published on Thursday that the bank would continue its cycle of rate rises. The forint has stuck in a tight range around 360 in recent trading and dealers say it will likely hang there until the Hungarian central bank meets next week. CEE SNAPSHOT AT MARKETS 1042 CET CURRENCIES Latest Previous Daily Change bid close change in 2021 EURCZK Czech 25.6400 25.6900 +0.20% +2.30% = crown EURHUF Hungary 359.3500 359.6900 +0.09% +0.94% = forint EURPLN Polish 4.5775 4.5872 +0.21% -0.40% = zloty EURRON Romanian 4.9245 4.9244 -0.00% -1.21% = leu EURHRK Croatian 7.5290 7.5245 -0.06% +0.25% = kuna EURRSD Serbian 117.5300 117.6050 +0.06% +0.03% = dinar Note: calculated 1800 daily from CET change STOCKS Latest Previous Daily Change close change in 2021 .PX Prague 1195.95 1188.120 +0.66% +16.43 0 % .BUX Budapest 47933.71 47882.56 +0.11% +13.84 % .WIG20 Warsaw 2251.02 2241.97 +0.40% +13.46 % .BETI Buchares 11916.15 11913.24 +0.02% +21.52 t % .SBITO Ljubljan 1133.93 1132.15 +0.16% +25.87 P a % .CRBEX Zagreb 1917.01 1918.48 -0.08% +10.22 % .BELEX Belgrade 772.39 770.59 +0.23% +3.18% 15 .SOFIX Sofia 565.92 563.18 +0.49% +26.45 % BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT= 2-year 1.4230 0.0040 +214bp +0bps RR s CZ5YT= 5-year 1.6380 -0.0230 +232bp -3bps RR s CZ10YT s Poland PL2YT= 2-year 0.4080 0.0250 +112bp +2bps RR s PL5YT= 5-year 1.0880 0.0010 +177bp +0bps RR s PL10YT s FRA 3x6 6x9 9x12 3M interba nk Czech

Hungary Poland Note: FRA quotes are for ask prices **************************************** ********************** (Reporting by Jason Hovet in Prague, Alicja Ptak in Warsaw, and Anita Komuves in Budapest, Editing by Sherry Jacob-Phillips)