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MNI China Daily Summary: Monday, May 29

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Koruna Extends Losses, Industrial PPI Slows More Than Expected

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EUR/CZK keeps creeping higher despite the absence of major local macro-events, with some pointing to pressure from core markets. The rate deals +0.010 at CZK23.681 after topping out at CZK23.762 an a clearance of Mar 28 high of CZK23.820 would open up Mar 17 high of CZK24.137. Bears keep an eye on May 9 low of CZK23.340.

  • Czechia's industrial PPI inflation slowed more than forecast to +6.5 Y/Y in April versus +7.5% expected. On a sequential basis, prices fell 1.2% M/M versus -0.2% median estimate. Local analysts noted that although prices in industry continued to fall on a monthly basis, they continued to rise in the services sector. Komercni banka wrote that the data suggests that headline CPI inflation should continue to cool relatively rapidly, but the core component is set to remain elevated for a longer period of time.
  • Ceska Sporitelna analysts attribute some of the recent koruna depreciation to the announcement of the government's fiscal consolidation package, which reduces pressure on the CNB to take a more hawkish course. Meanwhile, CSOB write this morning that EUR/CZK has moved above levels forecast by the CNB (CZK23.50 in 2Q2023) and at this level no longer is an anti-inflationary factor.
  • The local data docket is empty during the remainder of this week.
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EUR/CZK keeps creeping higher despite the absence of major local macro-events, with some pointing to pressure from core markets. The rate deals +0.010 at CZK23.681 after topping out at CZK23.762 an a clearance of Mar 28 high of CZK23.820 would open up Mar 17 high of CZK24.137. Bears keep an eye on May 9 low of CZK23.340.

  • Czechia's industrial PPI inflation slowed more than forecast to +6.5 Y/Y in April versus +7.5% expected. On a sequential basis, prices fell 1.2% M/M versus -0.2% median estimate. Local analysts noted that although prices in industry continued to fall on a monthly basis, they continued to rise in the services sector. Komercni banka wrote that the data suggests that headline CPI inflation should continue to cool relatively rapidly, but the core component is set to remain elevated for a longer period of time.
  • Ceska Sporitelna analysts attribute some of the recent koruna depreciation to the announcement of the government's fiscal consolidation package, which reduces pressure on the CNB to take a more hawkish course. Meanwhile, CSOB write this morning that EUR/CZK has moved above levels forecast by the CNB (CZK23.50 in 2Q2023) and at this level no longer is an anti-inflationary factor.
  • The local data docket is empty during the remainder of this week.