Most currencies, stocks higher as markets eye inflation data

Most central European currencies and stocks rose on Monday as investors look ahead to key inflation data due out in the United States and Hungary later in the week.

Stocks in the region were higher, tracking European peers that recovered after a sell-off on Friday, prompted by US payroll data seen by traders as an indication that the Federal Reserve could raise interest rates more aggressively to combat inflation, reports Reuters.

Budapest’s stock index led gains by adding 0.93%, while Prague equities were 0.18% higher. Warsaw added 0.32% while Bucharest gained 0.19%.

The Hungarian forint added 0.33% and was trading at 392.60, adding to its gains from the past week.

“The market started to appreciate the aggressive rate hikes from the central bank, while the bank’s fx swap tenders draining liquidity were also helpful,” a currency trader in Budapest said.

The technical picture, however, suggests that the forint will not be able to firm further than 388-390 unless a global turn towards risk-on sentiment, he said.

The central bank of Hungary raised its base rate by a hefty 100 basis points to 10.75% on July 26 as it fights soaring inflation.

Hungary reports July CPI numbers on Tuesday.

Elsewhere, the Polish zloty added 0.23% and was trading at 4.7005 versus the common currency.

Bank Millennium saw a calm week ahead for the zloty, where the rate could be influenced by U.S. inflation data due on Wednesday and to a lesser extent by local data such as final inflation numbers and a reading of the current account.

The Czech crown eased 0.13% to 24.532 per euro as data showed industrial output rose by a lower-than-expected 1.7% year-on-year in June after a rise of 3.3% in May.

Ratings agency Moody’s confirmed late on Friday the Czech Republic’s sovereign rating at Aa3, but changed the outlook to negative from stable, mostly due to risks stemming from the possible long-term disruption of Russian gas deliveries.

The decision by Moody’s had not had any significant impact so far on government bonds, a fixed-income dealer in Prague said.

The Romanian leu edged up 0.02% to 4.9245 per euro after the central bank raised its benchmark interest rate by 75 basis points to 5.50% on Friday, below expectations.

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