The Czech National Bank (CNB) cut interest rates by 25 bps to 4.25%, as anticipated. The CNB press conference offered little new information, dismissing the Fed’s decision and refraining from commenting on market pricing, notes ING FX strategist Frantisek Taborsky.
EUR/CZK bearish in the short term
“Of course, the Fed rate cut and dovish global outlook will be visible in the November forecast in a downward revision of the rate path. On the other hand, the next catalyst is September inflation, which is only mechanically pointing to 2.6% based on the previous deviation from the CNB forecast.”
“That is also what some of our numbers show, despite the drop in fuel and energy prices, which would push the CNB to an uncomfortable level given another jump in the base effect in December, raising the possibility of inflation returning to 3%. That is why our economists expect a pause in December.”
“From that perspective, we face a hawkish risk in the next two months, while the market leans towards a dovish stance in our view. Paying rates in CZK looks challenging in the current environment, but an inflation number could change that. Given this hawkish stance, we still expect EUR/CZK to decline in the near term, as the current rate differential suggests.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
