Koruna Slips With Price Dynamics Under Scrutiny

The 50% Fibo retracement of the Oct 26 - Nov 29 sell-off in EUR/CZK capped gains today at 24.475, with the pair trimming gains thereafter. The pair last deals +0.017 at 24.426, with bulls looking for a break above the aforementioned Fibo level, followed by Oct 26, 2023/Jul 7, 2022 highs of 24.747.24.797. Bears look for a retreat towards Nov 29 low of 24.203.

• Czechia enters a sensitive period for price-setting processes, with traditional repricing at the turn of the year providing a source of concern for the notoriously cautious CNB. Food prices are under particularly close scrutiny, with the government trying to pressure retail chains to refrain from hikes. Agriculture Minister Vyborny will discuss the matter with anti-monopoly authorities later today.
• November CPI printed slightly above CNB forecasts, muddying the waters ahead of the CNB's final monetary policy decision due next week:
  • Citibank retain their view that the CNB will hold rates next week after inflation overshot CNB and consensus forecasts.
  • Commerzbank wrote that it is only prudent for the CNB to wait with cutting rates until there is more clarity on the traditional January price hikes.
  • Goldman Sachs said that the headline inflation reading was a hawkish surprise, but the composition was notably more dovish.
  • JP Morgan admitted that "stronger CPI complicates CNB December meeting call" and believe that it will be a 50/50 one between a 25bp cut and a hold.
  • Komercni banka noted that inflation would have been below +5.0% if not for the statistical effect caused by the implementation of the energy savings tariff last year. They see 2024 inflation returning to the +2%-3% Y/Y range.