CZK: Koruna Trims Thursday's Data-Induced Loss
Relatively dovish data yesterday affected Czechia's rate profile, applying pressure to the koruna. EUR/CZK has trimmed yesterday's losses this morning and last deals -0.020 at 24.191. Bearish focus remains on the round figure of 24.0, with bulls eyeing another attack on the 50-DMA, which kicks in at 24.268.
- Headline CPI inflation unexpectedly cooled to +2.5% Y/Y amid a downturn in volatile food prices. Meanwhile, real wage growth slowed to +4.5% Y/Y in Q3, printing slightly below the +4.6% consensus call but slightly above the CNB's +4.4% projection.
- While not particularly influential compared to yesterday's wage and inflation data, Czech ex-auto retail sales came in at +2.8% Y/Y in October, marginally missing consensus forecast (+2.9%). The September print was revised to +2.8% from +2.6%.
- In the near term, the CNB is still expected to keep interest rates on hold. Recent comments from Governor Michl (for Novinky and in a parliamentary hearing) suggested that this was the most likely outcome of the December meeting.
- Looking further afield, the spread between 12x15 FRAs and 3-month PRIBOR tightened sharply to just 5bp on the back of yesterday's data, with market participants reassessing their view that the next move in rates will be a hike.
- At typing, CZGB yields sit a tad higher across the curve, having edged higher in line with regional trends. The PX Index refreshed all-time highs and last sits 0.9% higher on the session.
- On the political front, President Petr Pavel agreed to appoint Andrej Babiš to the position of Prime Minister on Tuesday after ANO leader unveiled a plan to resolve his potential conflict of interest.
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MNI: UK OCT FINAL SERV PMI 52.3 (51.1 FLASH, 50.8 SEP)
- MNI: UK OCT FINAL SERV PMI 52.3 (51.1 FLASH, 50.8 SEP)
- UK OCT FINAL COMPOSITE PMI 52.2 (51.1 FLASH, 50.1 SEP)
BELGIUM: Drones Shut Down Airports As Frozen Russian Asset Meeting w/EU Looms
Flights from Brussels and Liege airports were disrupted on 4 November due to the reported incursion of drones into the airspace around the locations, while the airbases at Kleine-Brogel and Florennes were also impacted according to local media (the former for the fourth night in a row). Air traffic at Charleoi was halted for a short time as a precaution, and VRT reports Ostend and Antwerp's Deurne airports were impacted over the weekend. These are the latest in a growing line of drone incursions into airspace around European airports that now include the cities of Munich, Copenhagen and Oslo.
- While the identity of those carrying out the incursions is not known, the timing of the incidents is notable given that Belgian ministers will meet with senior figures in the European Commission on Friday, 7 November amid disagreements over how or whether to utilised frozen Russian assets held in the EU (primarily in Belgium's Euroclear) to fund Ukraine.
- The Commission has proposed the use of 'reparations loans' that would see ~EUR140bln disbursed to Kyiv to support the war effort and its usual budgetary needs.
- The gov't of PM Bart De Wever is demanding that in exchange for its approval, member states' veto power over EU sanctions is removed (at present they must be renewed every six months, and if Budapest or others do not back them, Belgium would be at risk of having to pay Russia all of the frozen funds), and the EU and its member states provide written guarantees to not leave Belgium 'on the hook' if repayment is due.
EQUITY OPTIONS: BNP Put Option trade
BNP (19th Dec) 62p, traded at 1.87 in 6.2k (suggest sold).
