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CNB Rusnok: Labor Shortage Could Increase The Risk of Permanent Inflation

CZECHIA

  • Governor Rusnok talked about the Czech labour market in an interview yesterday and mentioned that companies would feel the shortage of labour in the near to medium term, which therefore increases the risk of permanent inflation.
  • Even though some market participants have started to price in an early move from CNB (at the June 23 meeting), we think that CNB policymakers will stick with their initial plan and therefore start the tightening cycle in August.
  • Two to three hikes are then priced in for the second half of this year.
  • The reaction on CZK was unchanged following Rusnok comments, and USDCZK continues to retrace higher this morning, gradually approaching its 21 resistance, a break above that level would open the door for a move up to 21.50 (50D and 100D SMA).
  • EURCZK has been trading sideways in the past few days and currently sits slightly below its 25.50 resistance; resistance on the topside stands at 25.74, followed by 25.82 (50D SMA). On the downside, first support stands at 25.27.
  • The 10y yield has been retracing lower in recent days and is currently testing its 100D SMA at 1.68; next levels to watch on the downside stand at 1.60%, followed by 1.52%. On the topside, first resistance stands at 1.77%, followed by 1.85%.
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