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CEE MARKETS-Zloty steadies ahead of CPI data, Czech crown eases

* Zloty steady, near 3-month lows

* Polish central bank unlikely to turn more hawkish

* Moody's: Poland's judiciary reform is credit negative

BUDAPEST/WARSAW, July 31 (Reuters) - The zloty steadied near 3-month lows against the euro on Monday as flash data due later in the day was expected to show a rise in Polish inflation, making it unlikely, though, that the central bank will lift interest rates. Political upheaval continues to weigh on Polish assets as over the weekend Brussels launched an infringement procedure against what it sees as the Polish government's attempts to undermine the independence of judges. On Monday rating agency Moody's Investors Service warned that the judiciary reform is credit negative.to The Polish inflation figures due later on Monday will provide other central banks of Central Europe with an indication of where inflation is heading in the rest of the region, as it tends to move in step. Analysts expect Poland's annual inflation to tick up to 1.6 percent from 1.5 percent in June. It would be the first rise since February. While a rise in crude prices in July could add to inflation pressure, most of the region's central banks do not appear worried over rising prices. Some Polish central bankers have warned of a tight labor market and the effects of continued negative real interest rates. But rate setter Eryk Lon was quoted as saying on Saturday that interest rates were likely to stay flat until the end of 2018, reiterating the message of bank governor Adam Glapinski.

The zloty was a touch firmer at 4.253 versus the euro at 0842 GMT and Polish government bonds were mostly flat. "PMI (figures due on Tuesday) and flash CPI for June... in our view will not have any material impact on the zloty and bonds," BZ WBK analysts in a note. In the unlikely event of a signal from the central bank for a possible earlier rate hike, investors would probably be cautious over the zloty due to tension between Warsaw and the European Commission over Poland's judiciary reform. The zloty regained some ground last week as President Andrzej Duda said he would veto two of the three reform bills. The government has stood firm on its planned reform, prompting street protests. The zloty still trades near last week's 3-month lows of 4.2715, and remains fragile. "We see the EURPLN to remain around 4.25-4.30 in the nearest future, until more about the reforms and its potential impact on the judiciary system independence will be known," Nordea analyst Natalia Kornela Setlak said in a note. Elsewhere in the region, the crown eased slightly against the euro as investors scaled back a touch ahead of the Czech central bank's meeting on Thursday when it could deliver its first rate hike in almost a decade.

CEE MARKETS SNAPSH AT 1042 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.060 26.042 -0.07% 3.63% 0 0 Hungary 304.81 304.64 -0.05% 1.32% forint 00 50 Polish zloty 4.2530 4.2551 +0.05 3.55%

%

Romanian leu 4.5595 4.5597 +0.00 -0.54%

%

Croatian 7.4100 7.4095 -0.01% 1.96%

kuna

Serbian 120.20 120.27 +0.06 2.62% dinar 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1013.1 1008.3 +0.48 +9.94 8 3 % % Budapest 35830. 35750. +0.22 +11.9 46 65 % 6% Warsaw 2377.3 2360.4 +0.72 +22.0 1 2 % 4% Bucharest 8357.3 8303.0 +0.65 +17.9 5 3 % 6% Ljubljana 812.18 811.45 +0.09 +13.1 % 8% Zagreb 1886.4 1884.5 +0.10 -5.43% 8 5 % Belgrade 726.01 728.80 -0.38% +1.20

%

Sofia 712.04 710.98 +0.15 +21.4 % 2%

BONDS

Yield Yield Spread Daily (bid) change vs change Bund in Czech spread

Republic

2-year 0.026 0.026 +071b +3bps

ps

5-year 0.072 0.049 +026b +6bps

ps

10-year 0.88 0 +034b +0bps

ps Poland

2-year 1.831 0.016 +252b +2bps

ps

5-year 2.665 0 +285b +1bps

ps

10-year 3.343 -0.003 +280b +0bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.45 0.68 0.75 0

IBOR=>

Hungary <BU 0.2 0.28 0.35 0.15

BOR=>

Poland <WI 1.78 1.789 1.831 1.73

BOR=>

Note: FRA are for ask quotes prices ******************************************************** *****

(Reporting by Sandor Peto; Editing by Raissa Kasolowsky)