There has been a succession of good news for Romania since the New Year and today is likely to be no expectation. The Romanian central bank may move to loosen reserve requirements rather than cut interest rates. But if they are tempted to cut, then something more modest like 25bp to 7.25% might give the right tone going forward (announced from 0930GMT onwards). Consensus is for 50bp cut to 7.00%, but either way the RON should be supported. Ahead of this ‘main event’ Romanian releases monthly retail sales at 0800GMT (November -9.0% YoY). Romanians normally like spending aggressively ahead of Christmas, so expect a bounce back. The key quarterly inflation report, which will be approved at today’s meeting, will probably be presented tomorrow or Friday (around 0930GMT). Romania is now expecting a very good wheat harvest this year (up 35% on 2009), with the recent snows having been beneficial to autumn-seeded cereal plantings. This news will help raise Romanian GDP forecasts, but also control headline inflation, with 35% of its content being food stuffs. Fitch has revised Romania's outlook to stable from negative, but left its long term rating at BB+. More of these kinds of moves from the ratings' agencies should be expected. After all, Romanian EURO denominated bonds trade below Greek levels, reflecting an economy that only has around 35% government debt to GDP and follows current IMF/EU guidelines and conditions. On the negative side, it is worth noting that Romanian clerical workers (50,000) staged a two hour ‘warning’ strike on Tuesday and are threatening to go on a full strike possibly as soon as next week. They are complaining about the government wage freeze and the plans to cut 100,000 state jobs by ‘natural wastage’.

(calyon)