The drop in USD this week seems to be linked to expectations that US data will come in soft. But hearing Fed speakers, the move seems a bit premature, even if it looks like we could get September payrolls data soon. In the UK, the government is scrapping its income tax hike plans. GBP downside risks have suddenly increased
Despite good ADP and ISM services data, the USD has corrected lower. With equities re-stabilising, the risks remain of further USD pullbacks after a rally that has exceeded what rate differentials can justify. Today, we see the BoE on hold despite mounting speculation of a pre-Budget cut. Norges Bank is likely to hold too, with low risks of guidance tweaks
Yesterday's PMI showed a mixed picture in the region, with the Czech Republic's lower-than-expected, while Poland and Hungary surprised with higher-than-expected readings. Inflation in Turkey surprised the market lower (2.6%/32.9%), in line with our estimate, and inflation returned to a declining trajectory.
EUR/USD has nudged through resistance at 1.1650 in quiet markets. The softer dollar has been the driver, although we wonder whether some compromise on the French budget is helping too.
Czech headline inflation eased in September due to subdued food prices. Yet annual price growth in services and rising rents continue to pose a risk of entrenching inflation expectations given the economic upswing. That said, worrying news from the main eurozone trading partners threatens to dampen the growth outlook
The dollar is a little stronger as investors reassess the immediacy of a US slowdown and what it means for interest rates. One early highlight for Europe is the Swiss National Bank meeting. Hardly anyone expects the policy rate to be cut into negative territory, but the franc remains strong and the SNB could try tweaking rates on excess reserves
Is the first CNB rate hike closer than we think? Friday's inflation data poses an upside risk but the market remains unfazed. The CNB could easily find itself in a situation where inflation stays above 3% for a longer period, and neither the central bank nor the markets are prepared for it. The discussion could quickly change from whether we will see another CNB rate cut to when we will see the first rate hike
