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Koruna Appreciates On Release Of Expectation-Beating Inflation Data

CZK

EUR/CZK sold off to its worst levels in three months upon the release of expectation-beating Czech inflation data, with headline accelerating to +2.9% Y/Y, close to the upper end of the CNB's tolerance band. This was above the +2.4% Y/Y consensus forecast in a Bloomberg survey and the CNB's +2.5% Y/Y projection.

  • When this is being typed, EUR/CZK trades -0.094 at 24.829. Bears look for losses past the 200-DMA (24.750) and Jan 25 low (24.716). Bulls keep an eye on the 100-DMA (25.093), followed by the 50-DMA (25.225).
  • The inflation data will support the case for a cautious monetary policy approach, as the Bank Board is trying to avoid a resurgence in inflation. Recent communications have included warnings that the rate-cutting cycle could be slowed or paused if the inflation path deviates from the forecast.
  • Czech FRAs jumped across the curve after the data crossed the wires and the markets turned more hawkish on the CNB. CZGB yield curve has bear steepened, with 10s underperfoming as we type.
  • The CNB will release its official comments on inflation data at 12:00BST/13:00CEST.
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