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CEE MARKETS-Czech crown drops with CPI surprise, Romanian leu steady before no-confidence vote

no-confidence vote@

PRAGUE, Oct 10 (Reuters) - The Czech crown eased on Thursday after consumer prices dropped the most on a monthly basis in 13 years, taking some pressure off the Czech National Bank to consider tightening its policy. In Romania, the leu was steady before a parliamentary no-confidence vote in which the centrist opposition is seeking to topple the Social Democrat government, one year before a general election. Other currencies also hung in recent ranges, with the Hungarian forint gaining 0.2% to 333.50 to the euro and Poland's zloty was flat at 4.321. The crown was the biggest mover, losing 0.2% to 25.855 to the euro by 0932 GMT after data showed prices dropped 0.6% month-on-month in September, pulling the headline year-on-year rate down to 2.7% and away from the upper end of the central bank's preferred range around its 2% target.

With central Europe's economies still on solid ground, and having not yet felt the full impact of a slowdown in Germany and the euro zone, central Europe's rate setters have largely shifted into wait-and-see mode on rates even as the European Central Bank eases policy. The Czechs, though, have kept open a rate hike debate and the Czech National Bank board voted 5-2 on Sept. 25 to maintain the base rate at 2.00%. The two dissenters pushed for a 25-basis-point increase and Governor Jiri Rusnok said the debate would continue at the next meeting in November. "The November policy meeting will not be easy due to the data development and the new staff outlook (due)," Michal Brozka, economist at Komercni Banka, said. "We still lean towards the worsening external situation and risk perception prevailing over faster inflation and the inflationary effect of domestic demand. We continue to expect rate stability through the whole of next year." The leu bid down just a touch at 4.751 to the euro just before Thursday's no-confidence vote. It has largely shrugged off politics. Prime Minister Viorica Dancila's cabinet lost its majority in August after a coalition junior ally, ALDE, quit over policy disagreements, leaving her vulnerable to a censure motion. "The uncertainty in (the) political governing solution will be extended to the coming months given a lack of parliamentary majority, with negative implications for fiscal policy too," Raiffeisen analysts said in a note. "The political crisis may reflect negatively on financial markets, though the magnitude of such reaction may be limited taking past examples of political crises into account."

CEE MARKETS SNAPSHOT AT

1132 CET CURRENCIES

Latest Previous Daily Changebid close change in 2019EURCZK= Czech crown 25.8550 25.8005-0.21% -0.57%EURHUF= Hungary forint 333.5000 334.3150+0.24% -3.72%EURPLN= Polish zloty 4.3213 4.3215+0.00% -0.73%EURRON= Romanian leu 4.7510 4.7500-0.02% -2.04%EURHRK= Croatian kuna 7.4265 7.4270+0.01% -0.22%EURRSD= Serbian dinar 117.4900 117.4600-0.03% +0.69%Note: daily change calculated from 1800 CETLatest Previous Daily Changeclose change in 2019.PX Prague 997.18 996.6200+0.06% +1.08%.BUX Budapest 39531.21 39544.62-0.03% +1.00%.WIG20 Warsaw 2114.94 2134.37-0.91% -7.10%.BETI Bucharest 9469.99 9514.48-0.47% +28.26%.SBITOP Ljubljana 871.47 864.92+0.76% +8.36%.CRBEX Zagreb 1933.22 1929.28+0.20% +10.54%.BELEX15 Belgrade 747.56 747.93-0.05% -1.86%.SOFIX Sofia 557.99 559.26-0.23% -6.13%

BONDS

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

Czech Republic spread

CZ2YT=RR 2-year 1.2540 -0.0110+198bps -2bpsCZ5YT=RR 5-year 1.0080 -0.0510+177bps -8bpsCZ10YT=RR 10-year 1.1620 -0.0250+170bps -5bps

Poland

PL2YT=RR 2-year 1.5080 0.0050+224bps -1bpsPL5YT=RR 5-year 1.6760 0.0110+244bps -1bpsPL10YT=RR 10-year 1.9080 0.0120+244bps -1bpsFORWARD RATE AGREEMENT3x6 6x9 9x12 3M interbankCzech Rep 2.22 2.17 2.06

2.17

Hungary 0.27 0.31 0.34

0.21

Poland 1.73 1.72 1.67

1.72

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

(Reporting by Robert Muller and Jason Hovet in Prague and Luiza Ilie and Timothy Heritage)