CZK: Koruna Erases Initial Losses, Industrial PPI Tops Forecasts
Jan-17 10:41
EUR/CZK deals -0.005 at 25.278 after briefly showing at new YtD highs. Bears look for a deeper pulback past the 100-DMA (25.204) and 50-DMA (25.192) towards the 25.0 area. Bulls keep an eye on Nov 6 high of 25.449.
- Expectation-beating industrial PPI data failed to catalyse any significant koruna moves after headline CPI provided a dovish surprise last week, while Deputy Governor Zamrazilova signalled readiness to consider resuming rate cuts early this year.
- Worth noting that Zamrazilova also said last week that EUR/CZK should stay around 25.0 in the absence of geopolitical risks, while also describing it as the most difficult variable to forecast.
- The CNB's Autumn forecast suggested that EUR/CZK should average at 25.37 in 1Q25, climbing to 25.43 in 2Q25.
- Komercni banka commented that the upside surprise in industrial PPI was chiefly due to the energy component, which was boosted by a significant but short-lived spike in spot wholesale electricity prices in December.
- CZGB yields have faltered across the curve and remain below neutral levels. The PX Index has rallied by 1.2% today, refreshing cyclical highs (i.e. best levels since 1H2008).
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ECB: Lane: Structural Bond Portfolio Will Be For Liquidity Provisions
Dec-18 10:35
Q: Any thoughts on the optimal size of the balance sheet?
Lane: “I think that reflect will reflect to where we live in because remember, by and large, most of the balance sheet expansion reflected the shocks we face”.
- “I think it's natural to have a role for structural operations, whether that's structural refinancing or the including a structural bond portfolio”.
- “It’s fairly universal that the banks need and want more liquidity than they had 15 years ago”…. “so working out the kind of steady state way to supply that liquidity across our instruments will influence the size of the balance sheet in the long term”.
- “The primary role of the structural bond portfolio will be to provide liquidity. Its scale will reflect liquidity provision”…. “It's not going to have the scale of a kind of QE type program”
- Lane also re-iterates that the best way to impact the monetary stance is the policy rate, when away from the lower bound.
GILTS: Under Pressure As Modest CPI Rally Gives Way
Dec-18 10:33
{GB} GILTS: Gilts fade the initial CPI-driven bid, as bearish technicals reassert themselves and oil ticks higher.
- Gilt futures through round number support at 93.00, last 92.90.
- Next support at a Fibonacci projection (92.78).
- Yields 0.5bp lower to 2bp higher, curve twist steepens.
- 30s consolidating the recent break break above 5.00%. Benchmark still ~15bp below ’23 highs, last 5.06%.
- 10s last 4.54%, November 14 high (4.566%) still untested.
- Early outperformance vs. Bunds fades, spread now only 0.5bp narrower on the day at 228.7bp. Yesterday saw the highest close for the spread since 1990.
- SONIA Dec ’25 BoE dated OIS/SFIZ5 futures operate around recent hawkish extremes with today’s inline to marginally softer-than-expected CPI data having little lasting impact, likely as the “surprises” within the data shouldn’t have too much of a bearing on monetary policy.
- BoE-dated OIS prices 55bp of cuts through ’25.
- SFIZ5 a little above triple bottom support that was printed in early to mid-November.
- Macro and cross-market cues set to dominate during the remainder of the day.
- Final ’24 BoE decision due tomorrow, click for our full preview.
ECB: Lane: Eurosystem Won't Run Scenarios On Trade Frictions Yet
Dec-18 10:22
Q: The Bundesbank last week in its forecast sketched out an impact on the German economy of a tariff scenario, which would tip it into a slight contraction. How do you see that for the Eurozone?
- Lane: This is why we made these observations in the monetary policy statement. Most of the time, it will be a downside for GDP, so we are clear on that. For inflation, there are many ancillary assumptions you have to make, so the impact is uncertain. The Bundesbank report makes a set of assumptions there.
- We have a good machine to run many scenarios, but it is not productive to work on that now. Once we have a clearer picture, we can assess the scenario in concrete and incorporate it into our assessment.
Q: In the event of increased tariffs, would the ECB welcome a depreciation in the Euro to increase competitiveness
- Lane: We will assess this on the impact it has on price stability. We take a general equilibrium view of the exchange rate. It is important to think about trade-weighted exchange rates rather than e.g. EURUSD. It matters quite a lot about how firms everywhere make pass-through decisions.
