The Czech crown recovered on Tuesday after the July CPI surprised on the upside. However, the magnitude of the inflation increase was rather modest: 2.2% y/y versus the 2.0% y/y expected. The monthly rate of change was more pronounced (0.7%), but this rate of change translates into a more modest 0.5% m/m after seasonal adjustment. The 0.5% m/m follows a flat reading in May and a decline of -0.3% m/m in June; the exponentially smoothed monthly rate of change reached 0.23% in July, notes Tatha Ghose, FX analyst at Commerzbank.
The data can be considered slightly positive for FX
“In summary, the trend is not at all worrying, although the July data reversed the extremely subdued readings of the previous two months. We consider these variations to represent mainly statistical noise plus some minor administrative and other seasonal changes.”
“In terms of the National Bank (CNB) rate cuts, we do not think this will change the practical picture much: the CNB will likely continue to cut the rate in 25 basis point steps at the next meetings. Perceptions had become somewhat extreme that rates could be cut to a fairly low level by the end of the year, for example to 3.00%; such expectations will now likely be removed from the market.”
“From a practical standpoint, we believe the data will strengthen the CNB’s ability to justify ending rate cuts when it deems appropriate. Therefore, the data can be viewed as mildly positive for FX, in line with the market reaction.”
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.
