Tuesday morning passed under the dictate of inflation readings. Recently these data are better in that they do not cause horror like last year. These remain key results for currency markets as up-and-coming interest rate cuts indicate directions for exchange rate changes.
Inflation in the Czech Republic
This morning we learned about inflation in the Czech Republic. It currently stands at 2.2%, which is very close to the target. There have been times when it was at 2% – in February, March, and June – but a reading of 2.9% was also recorded in April. The current level is therefore quite stable, so the Czech National Bank continues to cut interest rates. Since the decision in December, the main interest rate has declined from 7% to 4.5%. Today’s data caused some confusion in the Czech koruna quotations. Given that inflation is higher than expected, it is not surprising that investors are buying this currency. The reason is the assumption that the pace of interest rate cuts may slow down.
Germany Confirmed Data
Today Germany also confirmed the data on the price. These were final readings, so they did not have as much influence on the market as the original data. Annual inflation is 1.9%, which is almost exactly the inflation target. As a result, we probably have the last significant confirmation before the ECB meeting on Thursday. The sustained target inflation allows predicting that there will be no surprises with interest rates and we will see a cut. Part of the analysts talk about a possible larger rate cut to reduce the difference between the refinancing rate and the deposit rate.
Inflation in the Middle Kingdom
Data from China has the feature that in addition to often raised doubts about their credibility by analysts, they often require more attention. For example, observing yesterday’s inflation at 0.6% in Europe, we treat it as a solid quarterly result or a problem on a monthly basis. Beijing showed such a figure on an annual scale. This means that prices are almost standing still, which is even an increase from 0.5% in the previous month. Additionally, there was deflation in January. As you can see, the local central bank is dealing with completely different challenges than western banks. For this reason, the yuan has been on a good run lately, as investors are considering price cuts in the US and eurozone.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
Source: https://managerplus.pl/dzien-odczytow-inflacyjnych-88890
