BUDAPEST: Hungary's forint hovered around 2-week highs versus the euro on Tuesday, unfazed by January PMI data which signalled a slowdown in the growth momentum in Central Europe as global supply problems took their toll on the region's fast-growing economies.
The forint and the Czech crown have been leading the region's currencies higher this year, with the forint firming 3.9%, as the Hungarian central bank accelerated its tightening campaign last month, raising its base rate by a bigger than expected 50 basis points to 2.9% to fight inflation.
The bank pledged there were "no taboos" with respect to rate increases to bring inflation back to its target.
Rouble hits one-week high vs dollar with Ukraine in focus
The Czech National Bank is meeting on Thursday and is expected to hike interest rates by probably more than 50 basis points again, after massive increases last year. The crown was stable ahead of the rate-setting meeting but traders said further gains were possible.
On Tuesday, data showed the Czech economy expanded by 0.9% quarter-on-quarter in October-December, well above a Reuters poll forecast for growth of 0.1%.
"GDP performance is good news for the crown, which can expand its gains against the euro. The crown may benefit from both the good GDP performance and also speculation that in light of that the CNB may consider a more significant rise in interest rates," said Radomir Jac, chief economist at Generali Investments CEE.
He added he expected a 50 bps or even 75 bps increase at the Feb 3 rate meeting.
While the Q4 2021 Czech GDP data were strong, purchasing manager indexes (PMIs) eased in January in Hungary, Poland and the Czech Republic as well. The data published earlier on Tuesday pointed to continued expansion but a slowing momentum.
"The Hungarian PMI retreating to 50.7 from 65.5 is not tragic in itself. Rather, it shows that manufacturing companies still forecast expansion," said Peter Virovacz, an analyst at ING in Budapest.
"The only question is how this will be possible given the known bottlenecks, the energy crisis, shipment problems and disrupted supply chains."
Stock markets were moderately higher on Tuesday with Warsaw stocks gaining 0.75% by 0855 GMT, and Budapest rising 0.3%.