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CZK: Koruna Remains On Defensive After CPI Miss

CZK
EM BulletCzech RepublicBulletEmerging Market NewsCentral and Eastern EuropeCzechia

The koruna remains the worst CE3 performer, following the publication of expectation-missing CPI data yesterday. The rate rallied in reaction to the release and subsequent commentary, resuming gains into the European open today. At typing, EUR/CZK changes hands +0.054 at 25.283 after topping out at 25.284, the highest point since early December. The high print of Nov 6 provides the next target on the topside at 25.449. Meanwhile, bears look for losses towards the 25.0 figure.

  • Post-CPI musings dominate domestically amid little in the way of fresh market-moving headlines, with local sell-side desks converging towards the view that the data increased the odds of a resumption of monetary easing at the CNB's meeting in February:
    • Ceska sporitelna noted that the miss vs. expectations in December inflation "may significantly increase the probability of a rate cut at the February CNB meeting." Still, they believe that the preliminary CPI reading for January will be the decisive factor and it will only be released shortly before the meeting itself.
    • CSOB pointed to disinflationary structure of December data and said that their model shows a decrease in inflation in January to closer to +2.5% Y/Y as opposed to the expected +2.7%. In their view, if this materialises, it "would be a strong argument for cutting rates by another 25bp." They pencil in another 25bp cut after February before the CNB pauses again.
    • Komercni banka wrote that "a favourable price outlook for the coming months could convince the central bank to resume the process of interest rate cuts in February."
  • CZGB curve runs somewhat flatter. The PX Index is 0.6% better off, refreshing cyclical highs.
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The koruna remains the worst CE3 performer, following the publication of expectation-missing CPI data yesterday. The rate rallied in reaction to the release and subsequent commentary, resuming gains into the European open today. At typing, EUR/CZK changes hands +0.054 at 25.283 after topping out at 25.284, the highest point since early December. The high print of Nov 6 provides the next target on the topside at 25.449. Meanwhile, bears look for losses towards the 25.0 figure.

  • Post-CPI musings dominate domestically amid little in the way of fresh market-moving headlines, with local sell-side desks converging towards the view that the data increased the odds of a resumption of monetary easing at the CNB's meeting in February:
    • Ceska sporitelna noted that the miss vs. expectations in December inflation "may significantly increase the probability of a rate cut at the February CNB meeting." Still, they believe that the preliminary CPI reading for January will be the decisive factor and it will only be released shortly before the meeting itself.
    • CSOB pointed to disinflationary structure of December data and said that their model shows a decrease in inflation in January to closer to +2.5% Y/Y as opposed to the expected +2.7%. In their view, if this materialises, it "would be a strong argument for cutting rates by another 25bp." They pencil in another 25bp cut after February before the CNB pauses again.
    • Komercni banka wrote that "a favourable price outlook for the coming months could convince the central bank to resume the process of interest rate cuts in February."
  • CZGB curve runs somewhat flatter. The PX Index is 0.6% better off, refreshing cyclical highs.