"An economist is someone who sees something working in practice and asks whether it would work in principle." - Stephen M. Goldfeld

FOREX MARKET
Romania's headline inflation decelerated to 3.7% y/y in March, as monthly inflation advanced by a modest 0.07%, due to the drop in food goods prices. The annual average inflation, which is considered by the Maastricht criteria, slowed down 5.4% y/y in March from 5.8% the previous month.
On Wednesday, the single currency was bided at 3.3390 level at the opening of the forex session. In the first hour of trading, the buying pressure pushed the pair up to 3.3410 zone. In the second part of trading, the pair reversed its move to the downside, as both individuals and corporative clients sold the single currency. EUR/RON slipped down to 3.3330 zone by the closing time, mirroring its regional peers. On April 12th, the domestic forex market opened in the 3.3350 zone, but remained flat in this zone in the first hours of trading.
On April 12th, the euro surged to a fresh two-year peak against the dollar and a historical high against the yen, as investors started to price in that the ECB would signal a rate hike for June in its post meeting statement. The market unanimously expects that ECB will keep rates on hold at 3.75% at today's policy meeting. In early-European trading, the EUR/USD is traded in the 1.3460 zone.

MONEY MARKET
On April 11th, the Minster of Finance sold 12M discount treasury bills worth RON 422mln, although they initially planed to drain RON 1.5bln. The overall offer stood at RON 2.3bln, but participants demanded higher yields than the MF was willing to pay for one-year debt instrument, respectively 7.39%. The average accepted yield rose to 7.23% from 7.03% at the previous auction, as participants demanded higher risk premiums after the worsening of political climate.
The overnight interest rates dropped to 6/7% bids/asks, as the liquidity increased gradually due to NBR's partial sterilization and low allotment percent of MF. Today, the National Bank will hold 3M CD's auction, announcing an indicative amount of RON 1.6bln. It is likely that the average interest rate would stand slightly below the monetary policy rate, as the interbank market is in danger to abound in liquidity, the more so as on Friday there will come to maturity 3M CDs worth RON 2.5bln with NBR. Also, the market lowered its expectations regarding the key policy rate due to the faster than expected evolution of disinflation process which is likely to encourage the NBR to further ease the monetary policy.