On the radar
-
Inflation rate in Poland increased to 4.2% y/y in July that is less than anticipated by the market consensus.
-
Flash estimate of July’s inflation in Croatia arrived at 2.3% y/y while in Slovenia at 1.3% y/y.
-
2Q24 GDP in Serbia landed at solid 4.2% y/y.
-
Retail sales growth accelerates to 7.2% y/y while industry expanded 2.0% y/y in July in Serbia.
-
In Romania unemployment rate increased to 5.5% in June.
-
PMI index dropped to 47.8 in July in Romania, while in Poland the index rose for the first time in four months from 45.0 in June to 47.3 in July.
Economic developments
On Wednesday, the flash estimate of Eurozone annual inflation in July ticked up to 2.6% from 2.5% in June. Looking at the main components of Euro area inflation, services are expected to have the highest annual rate in July (4.0%, compared with 4.1% in June), followed by food, alcohol & tobacco, and energy. As far as the region is concerned, flash estimates for July for several countries show a mixed bag. In Croatia and Slovenia, July's inflation rate eased to 2.3% y/y and 1.3% y/y, respectively, while in Slovakia (HICP release), it increased to 2.9% y/y from 2.4% y/y in June. In Poland, July's inflation increase was hefty as it arrived at 4.2% y/y (translating into a 1.4% monthly CPI increase) as opposed to June's figure of 2.6% y/y. The jump happened primarily due to the deregulation of energy prices. The annual inflation rate was 0.2pp below consensus, with our projection being marginally lower than the flash estimate at 4.0%. Post July's inflation jump, price growth is projected to rise towards 5% y/y, mainly due to the unfavorable base effect. In the reminder of the year, apart from Poland, we will see elevated inflation in other countries such as Czechia or Hungary.
Market developments
Today, the Czech central bank holds a rate-setting meeting, and a 25 basis point cut is broadly expected. Although some central bankers said they would consider a bigger rate cut as June's inflation surprised to the downside visibly, the anticipated increase towards the end of the year will keep the Board on the cautious side in our view. All in all, we expect the key interest rate to be at 4.5% after today's meeting. The EURCZK is holding slightly higher this week at 25.42. The other currencies in the region have also weakened since the beginning of the year. The long-term yields have moved lower more visibly this week as markets are positioning for the rate cut in the US in September. In the US, the key interest rates were left unchanged at the meeting of the FOMC on Wednesday. However, according to Powell, if the data continues to be good, a rate cut in September would be on the table.
This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.
Recommended Content
Editors’ Picks
GBP/USD extends losses below 1.2800, as BoE rate cut looms
GBP/USD is extending losses below 1.2800, snapping the previous rebound led by the dovish Fed policy outlook. The pair stays heavy on 'Super Thursday', anticipating a BoE interest-rate cut and Governer Bailey's comments.
EUR/USD drops below 1.0800, as US Dollar rebounds ahead of data
EUR/USD is dropping below 1.0800 in the European session on Thursday. The US Dollar finds its feet after the dovish Fed decision-led slump. Looking ahead, the US ISM Manufacturing PMI data will be the highlight.
Gold price falls slightly as US Dollar advances ahead of US manufacturing PMI, NFP
Gold price (XAU/USD) edges lower after posting an almost two-week high at $2,458.50 in Thursday’s European session. The precious metal falls slightly as the US Dollar (USD) rebounds.
Bitcoin price falls to $64,000 following $3.1 billion BTC transfer by Mt. Gox
Mt. Gox moved $3.1 billion worth of BTC on Wednesday. Grayscale Mini BTC ETF receives a $1.8 billion inflow on Wednesday. The FOMC decided to hold US interest rates steady, resulting in a BTC price decline.
BoE interest rate decision fairly divided ahead of Thursday announcement
Odds for a rate cut by the Bank of England remain divided. UK disinflationary pressure stalled in June. GBP/USD appears to be supported so far by 1.2800 region.