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AUD Leads G10 Pack, Volatility Subdued

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  • The Czech government today approved the Partnership Agreement for EU funding in 2021-2027 and the information on operational programmes should be sent to the European Commission in three months, Regional Development Minister Klara Dostalova told journalists after a cabinet meeting. Czechia will get Kc550bn from the Cohesion Fund. With the EU Recovery Fund, the overall funding will reach Kc978bn (BBG).
  • According to latest polls, Czech Prime Minister Andrej Babis's ANO party's lead narrowed in September ahead of general elections on October 8/9.
  • This week (September 30), CNB is very likely to raise its benchmark rate by 50bps based on recent policymakers 'hawkish' speeches.
  • Recently, we saw that a rising number of CNB members have mentioned that a bigger rate hike may be necessary to curb the inflationary pressures.
  • We have seen that the hawkish CNB tone has been strongly supporting cyclical equities (i.e. financials), partly driven by the rise in ST bond yields and broad CZK strength. Czech equities (PX Index) are currently trading at a 13-year high.