Central Europe
Poland’s inflation will stay elevated. And yet, its return to the European mainstream has improved its financial market outlook. Accordingly, we are recommending new trades on Polish equity, fixed income, and currency.
Real wages are set to rise in CE3 economies with implications for their asset markets and currencies. Of the three, Polish assets and the zloty are the most vulnerable.
The growth and inflation profiles of the three central European countries are set to diverge. The outlook for Polish and Hungarian Bonds are not attractive anymore. Book profits on them. Instead, initiate a new trade: pay Polish / receive Czech 10-year swap rates.
It’s time to go overweight Hungarian domestic bonds in an EM and European core bond portfolios. Currency investors should book profits on our long CZK / short HUF trade, which has generated 29.4% gains since its inception in June last year.
