CEE: Polish government to discuss higher budget deficit - ING

The calendar will become more interesting tomorrow. However, the Polish government is expected to today discuss an increase in the state budget deficit for this year following weaker tax revenues and higher flood-related spending, ING's FX analyst Frantisek Taborsky notes.

Stabilisation of EUR/USD can bring relief to CEE currencies

"Newspaper rumours most often mention an increase of around 30bn of additional borrowing needs, which corresponds to roughly 1-1.5x the monthly supply of POLGBs at the moment. Also, a POLGBs auction is scheduled for today and MinFin will test market demand after weak demand last week, but at the same time bonds have been posting a bit higher yield since then."

"The Czech market is back from a public holiday and we will likely see more CNB comments today or tomorrow ahead of Thursday's blackout period. The CZK came under pressure yesterday since domestic demand has been missing from the market while the currency has been catching up with the weakness of Central and Eastern Europe (CEE) peers in the previous days. EUR/CZK stood above 25.350 for the first time in two weeks. Still, the CNB forecasts 25.20 on average for the fourth quarter and the weakening in recent days should not be a major factor in the November decision."

"Overall, we see that the CEE region remains under pressure and, as mentioned earlier, we don't expect much change here pending the outcome of the US election. At least a stabilisation of EUR/USD could bring some relief to CEE currencies. Overall though, the focus remains on EUR/HUF, which closed at new highs yesterday, heading slowly towards 405. EUR/PLN will be watched as the market accepts the increase in the state budget deficit and the outcome of the POLGBs auction."