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from Global Investing:
No Czech intervention but watch the crown
The Czech central bank surprised many this week after its policy meeting. Widely expected to announce the timing and extent of FX market interventions, Governor Miroslav Singer not only failed to do so, he effectively signalled that intervention was no longer on the cards -- at least in the short term In his words, looser monetary conditions were now “less urgent”.
What changed Singer's mind? After all, data just hours earlier showed Czech industrial production plunging 12 percent year-on-year in December. The economy has not grown since mid-2011 and is likely to have contracted by more than 1 percent last year. Singer in fact predicts a second full year of recession. But some slightly upbeat-looking forward indicators could be cause for cheer. According to William Jackson at Capital Economics:
We think that the need for further policy loosening was tempered by the tentative pick-up in the most recent survey data as well as the fall in the crown (versus the euro) since the start of the year.
Until yesterday's meeting, the crown had fallen 3 percent since the start of the year to seven-month lows against the euro. January purchasing managers indexes (PMI) this week also showed the Czech indicator rising more than expected to 48.3, up from December's three-year low of 46.0. That gelled with a pick-up in PMIs also in neighbouring Poland and Hungary. A separate survey also shows that the business climate in emerging Europe ticked higher in January for the first time since April. The OeKB Central and Eastern Europe Business Climate index of around 400 Austria-based direct investors edged up to 17 points, from 14 in October and the Czech component rose two points to 24, the highest since the second quarter of 2012.
from Global Investing:
After bumper 2012, more gains for emerging Europe debt?
By Alice Baghdjian
Interest rate cuts in emerging markets, credit ratings upgrades and above all the tidal wave of liquidity from Western central banks have sent almost $90 billion into emerging bond markets this year (estimate from JP Morgan). Much of this cash has flowed to locally-traded emerging currency debt, pushing yields in many markets to record lows again and again. Local currency bonds are among this year's star asset classes, returning over 15 percent, Thomson Reuters data shows.
But the pick up in global growth widely expected in 2013 may put the brakes on the bond rally in many countries - for instance rate hikes are expected in Brazil, Mexico and Chile. One area where rate rises are firmly off the agenda however is emerging Europe and South Africa, where economic growth remains weak. That is leading to some expectations that these markets could outperform in 2013.
from Global Investing:
This week in EM, expect more doves
With the U.S. Fed having cranked up its printing presses, there seems little to stop emerging central banks from extending their own rate cut campaigns this week.
The most interesting meeting promises to be in the Czech Republic. We saw some extraordinary verbal intervention last week from Governor Miroslav Singer, implying not only a rate cut but also recourse to "unconventional" monetary loosening tools. Of the 21 analysts polled by Reuters, 18 are expecting a rate cut on Thursday to a record low 0.25 percent. Indeed, in a world of currency wars, a rate cut could be just what the recession-mired Czech economy needs. But Singer's deputy, Moimir Hampl, has muddled the waters by refuting the need for any unusual policies or even rate cuts. Expect a heated debate (forward markets are siding with Singer and pricing a rate cut).
from Global Investing:
Fed re-ignites currency war (or currency skirmish)
The currency war is back.
Since last week when the Fed started its third round of money-printing (QE3), policymakers in emerging markets have been busily talking down their own currencies or acting to curb their rise. These efforts may gather pace now that Japan has also increased its asset-buying programme, with expectations that the extra liquidity unleashed by developed central banks will eventually find its way into the developing world.
The alarm over rising currencies was reflected in an unusual verbal intervention this week by the Czech central bank, with governor Miroslav Singer hinting at more policy loosening ahead, possibly with the help of unconventional policy tools. Prague is not generally known for currency interventions -- analysts at Societe Generale point out its last direct interventions were conducted as far back as 2001-2002. Even verbal intervention is quite rate -- it last resorted to this on a concerted basis in 2009, SoGen notes. Singer's words had a strong impact -- the Czech crown fell almost 1 percent against the euro.
from Photographers Blog:
Cliff diving for the brave
By David W Cerny
Right in the middle of the summer season in Czech Republic, divers show off their guts in a cliff-diving competition at the flooded quarry near the central Bohemian village of Hrimezdice.
This event has a 13 year history and is getting bigger every year. It was just a few courageous jumpers in the beginning, but now its a very popular cliff diving and music festival with thousands of visitors and more then 60 jumpers.
from Global Investing:
India, a hawk among central bank doves
So India has not joined emerging central banks' rate-cutting spree . After recent rate cuts in Brazil, South Korea, South Africa, Philippines and Colombia, and others signalling their worries over the state of economic growth, hawks are in short supply among the world's increasingly dovish central banks. But the Reserve Bank of India is one.
With GDP growth slowing to 10-year lows, the RBI would dearly love to follow other central banks in cutting rates. But its pointed warning on inflation on the eve of today's policy meeting practically sealed the meeting's outcome. Interest rates have duly been kept on hold, though in a nod to the tough conditions, the RBI did ease banks' statutory liquidity ratio. The move will free up some more cash for lending.
from Global Investing:
The (CDS) cost of being in the euro
What's the damage from being a member of the euro? German credit default swaps, used to insure risk, have spiralled to record highs over 130 basis points, three times the level of a year ago amid the escalating brouhaha over Spain's banks and Greek elections. U.S. CDS meanwhile remain around 45 bps. That means it costs 45,000 to insure $10 million worth of U.S. investments for five years, compared to $135,000 for Germany. (click the graphics to enlarge)
A smaller but similarly interesting anomaly can be found in central Europe. Take close neighbours, the Czech and Slovak Republics who are so similar they were once the same country. Both have small open economies, reliant on producing goods for export to Germany.
from Photographers Blog:
Shooting practice
By Petr Josek
Yeah, yeah, yeah 4-1 loss for the Czechs against Russia in Wroclaw. The Russian fans left the city for Warsaw after that and ended up fighting Polish supporters. Wroclaw is calm and quiet. Here the fans like each other and the city center is calm and full of friendly faces. The spotlight moves on, but there is still work to be done.
After the next round the Czechs became a decisive opponent for Poland in advancing from Group A. Its a championship and the teams need to keep sharp, away from the headlines, and for photographers there are images to be made that tell the story. Eyes on the prize.
from Global Investing:
Hungary’s plan to get some cash in the bank
Hungary says it might borrow money from global bond markets before it lands a long-awaited aid deal with the International Monetary Fund. That pretty much seems to suggest Budapest has given up hope of getting the IMF cash any time soon. Given the fund has already said it won't visit Hungary in April, that view would seem correct.
There is some logic to the plan.
Hungary desperately needs the cash -- it must find over 4 billion euros just to repay external debt this year.
from Photographers Blog:
Race into the cold
By Petr Josek
Mountains, snow, wind, cold, sun, dogs, sleds and mushers. Those are elements you meet in various combinations when you go to cover the Sedivackuv long dog sled race in the Czech Republic's Orlicke mountains. It's a beautiful place. I've been covering the race since 2005 and I always look forward it. You need to get well dressed for that, we call it double-full-full. I remember temperatures of -20 degrees Celsius (-4 degrees Fahrenheit) with strong winds.
There is always the obvious problem of how to cover the same event differently every year, especially as we don't have giant mountains with high summits and there's not always bright sun. But I think that nice pictures showing the event and describing its atmosphere can't hurt once a year.
