The central banks are back in session and for the most part, delivered results that were also priced in by the markets. Unlike the Fed and ECB, central banks in CE/SEE are already actively discussing interest rate cuts, some of which have already been implemented. Nevertheless, the interest rate differential is currently still favorable for the latter. In Russia, the situation is different; most recently, the CBR increased the interest rate by 200 bp to 15%, but this has only a limited impact on the exchange rate. Poland and Hungary also combine a positive outlook for the disbursement of NGEU funds, improving their overall outlook. In Southeastern Europe, the RON continues to show resilience and the expected capital inflows should keep it that way.
This issues features
The focus of attention in recent weeks has been on (geo)political events. The ongoing conflict between Israel and Palestine escalated once again into acts of war, the intensity of which, however, is substantially higher than in previous years. Nevertheless, it caused only limited uncertainty on global markets, at least so far. The Swiss franc gained and the U.S. dollar also benefited from these events, even if it does not seem like it at first glance. In Poland, the expected change of power in the parliamentary elections in favor of pro-European forces caused considerable euphoria in the markets and a stronger złoty. The Serbian dinar defied the political environment and showed its strength, supported by capital inflows. The weak Russian rouble finally led to the long-discussed reintroduction of capital controls.
This issues features
Despite leading the exit polls and first (partial) official results, the governing Law and Justice (PiS) has most likely not received enough support to form a government. This implies it will be the coalition of three opposition parties which form the new government after two terms of PiS ruling. The shift of power will bring significant changes while bearing risks and uncertainties. However, so far, the result has led to a positive market reaction (stronger PLN) and has positive implications to GDP outlook.