CZK: Koruna Edges Higher Ahead Of CNB Rate Decision
EUR/CZK operates -0.015 at 25.113 despite briefly piercing the 200-DMA on the topside. A sell-off past the psychologically significant round figure of 25.0 would reignite bearish momentum, representing an important technical development. Conversely, bulls look for a clean break above the 200-DMA (25.139) before taking aim at the 100-DMA (25.201) and 50-DMA (25.240).
- The Czech National Bank (CNB) will announce its rate decision at 13:30GMT/14:30CET and most analysts expect a pause in the rate-cutting cycle, while the accompanying rhetoric may shed some light on the outlook. Among others, participants will scrutinise the Bank Board's assessment of inflation developments, the vote split and any hints what were the options put to discussion. Our preview with a summary of sell-side views can be accessed here.
- CZGB yields sit higher, curve runs steeper, with 7s underperforming. The PX Index continues to trade sideways within a tight range just shy of recent multi-year highs.
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FOREX: FX OPTION EXPIRY
Of note:
AUDUSD 1.46bn at 0.6600 (a bit too far).
EURUSD 1.03bn at 1.0600 (thu).
USDCAD 1.1bn at 1.4000/1.4025 (thu).
AUDUSD 1.85bn at 0.6450 (thu).
- EURUSD: 1.0520 (450mln), 1.0545 (855mln), 1.0590 (500mln), 1.0600 (301mln), 1.0625 (354mln), 1.0650 (1.71bn).
- AUDUSD: 0.6600 (1.46bn).
- AUDNZD: 1.1035 (347mln).
ECB: Panetta Cements Dovish Stance In Call
The ECB should lower interest rates to neutral “or even into expansionary territory if necessary” as restrictive monetary conditions are no longer necessary across the euro area with inflation close to target and domestic demand stagnant, Bank of Italy Governo Fabio Panetta said Tuesday.
- Panetta noted on 23 October that the ECB cannot exclude the necessity to lower borrowing costs below a neutral level, but his latest comments are much more explicit.
- Overall, this cements the Bank of Italy Governor's dovish stance. As such, there was little tanglible reaction in EUR STIRs to the comments, with the latest Russia/Ukraine headlines driving price action this morning.
EUROPEAN INFLATION: EZ Final HICP Broadly In-Line with Flash
Eurozone October Final HICP was in-line with flash at 2.00% Y/Y (vs 2.00% flash, 1.74% prior) and 0.3% M/M non-seasonally adjusted (vs 0.34% flash, -0.09% prior).
- Core inflation (ex energy, food, alcohol & tobacco) also saw little revision at 2.69% Y/Y (vs 2.68% flash, 2.67% prior) and 0.25% M/M (vs 0.23% flash, 0.07% prior).
- The final reading reaffirms the stickiness seen in the flash services inflation print, with services contribution broadly unchanged at 1.77ppts (vs 1.76 ppts in September) and the Y/Y figure rising to 3.95% Y/Y (vs 3.92% flash, 3.92% prior).
- The change in Energy's contribution to headline CPI was the most significant driver this month, with the contribution increasing to -0.45ppts (from -0.60ppts in September).
- The contribution of "Unprocessed foods" increased 0.06ppts to 0.13ppts in October - the highest since January 2024 while the contribution from "Processed foods, alcohol and tobacco" edged up to 0.43ppts (vs 0.39ppts in September).
- "Non-energy industrial goods" (i.e. core goods) contribution was broadly similar to both August and September at 0.13ppts (vs 0.12ppts in September).
