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CZECHIA: Inflation Report Pressures Koruna

CZECHIA
EM BulletBulletEmerging Market NewsCentral and Eastern EuropeCzechia
  • The koruna sold off at the start to the week as below-forecast inflation data led to dovish CNB repricing. Following the release of the data, Deputy Governor Zamrazilova flagged rising odds of the central bank resuming rate cuts early this year, while ING recommended selling the koruna against the euro. They wrote that "rate cuts could resume at the next CNB meeting if the preliminary inflation estimate in January brings no nasty upward surprises."
    • Meanwhile, Commerzbank wrote that "the market reaction (...) feels like kneejerk" as "the downside surprise in CPI was driven mostly by volatile food prices," which was not paralleled by any marked deceleration in the "stubborn services inflation." They noted that "if the CNB were to simply restart rate cuts in a mechanical manner based on some superficial justification from the CPI print, that could turn out to be double negative for the exchange rate."
  • Seznam Zpravy reported that Czech political parties are focusing campaign efforts on Central Bohemia, the most populous region and the largest contributor of parliamentary seats. It is also considered a "swing" region, with almost every major party able to boast some electoral success there at some point.
  • Bloomberg reported that Prime Minister Petr Fiala and Finance Minister Zbynek Stanjura will hold talks with senior executives of state-owned pipeline operator Mero about plans to secure oil supplies through TAL pipeline.
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  • The koruna sold off at the start to the week as below-forecast inflation data led to dovish CNB repricing. Following the release of the data, Deputy Governor Zamrazilova flagged rising odds of the central bank resuming rate cuts early this year, while ING recommended selling the koruna against the euro. They wrote that "rate cuts could resume at the next CNB meeting if the preliminary inflation estimate in January brings no nasty upward surprises."
    • Meanwhile, Commerzbank wrote that "the market reaction (...) feels like kneejerk" as "the downside surprise in CPI was driven mostly by volatile food prices," which was not paralleled by any marked deceleration in the "stubborn services inflation." They noted that "if the CNB were to simply restart rate cuts in a mechanical manner based on some superficial justification from the CPI print, that could turn out to be double negative for the exchange rate."
  • Seznam Zpravy reported that Czech political parties are focusing campaign efforts on Central Bohemia, the most populous region and the largest contributor of parliamentary seats. It is also considered a "swing" region, with almost every major party able to boast some electoral success there at some point.
  • Bloomberg reported that Prime Minister Petr Fiala and Finance Minister Zbynek Stanjura will hold talks with senior executives of state-owned pipeline operator Mero about plans to secure oil supplies through TAL pipeline.