Key events in EMEA and Latam this week

The Czech National Bank delivered a 50bp emergency rate on Monday and is very likely to continue lowering borrowing costs to mitigate the coronavirus shock, though it will be more of a signaling measure. This means that the main 2-week repo rate is likely to fall further in the coming months with the central bank delivering another 50bp rate cuts on Thursday. In case CZK heads above the 28 EUR/CZK level, the CNB will likely step into the market and support the koruna so as not to see adverse effects from shock depreciation.

As Covid-19 reached Hungary in early-March, we expect the sentiment indices for this month to reflect the impact. Both household and business confidence might drop to multi-year low levels, and this will be just the beginning of a rush of bad data. In such an extreme environment, the National Bank of Hungary rate setting meeting could have been interesting, but the central bank has already announced a lot of measures and made suggestions on how to give breathing room to businesses, households and the banking sector. From liquidity enhancing measures to restructuring the collateral rules, loan payment moratoriums and a possible restart of mortgage bond buying, we’ve already seen almost everything. There is not much left for the meeting. So we see the rates remaining unchanged and NBH will explain the necessity of all the announced measures. As one concrete step, we expect to see the NBH increasing the targeted average level of crowded out liquidity. Besides this, the new staff forecast will be interesting, but due to the cut-off date, we might need to check the alternative scenarios rather than the base case.

Releases this week from Poland should have limited market relevance. The budget performance after February is likely to be still decent as activity surprised on the upside. The decisions of economic lockdown were made in March, therefore economic consequences will be seen from next month’s releases onwards.