EUR/USD has held onto its gains this week – though that largely looks a function of the slightly softer dollar. Yesterday's release of the German ZEW expectations index for November was not particularly encouraging. However, the aggregate ZEW figure for the eurozone as a whole ticked up, questioning whether Germany is increasingly becoming an outlier.
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.
CZK Poised to Gain as CNB Enters Blackout, Eyes on Hungary’s Budget Vote
Quiet start to Tuesday with G10 FX trading in tight ranges against the USD, US equity futures flat while USTs are weaker, led by the back-end. Reports suggest that India could cut its tariffs on US imports to avoid April 2 measures, following Trump's headlines on Monday on a potentially softened and/or targeted approach.
Positive growth impulse in Europe counters tariff hit to Asia The pick-up in risk aversion at the start of this week amongst market participants has triggered a correction lower for emerging market currencies. The CLP (-1.7% vs. USD), COP (-1.2%), BRL (-1.1%), IDR (-0.9%) and THB (-0.7%) have weakened the most since the end of last week while the Central European currencies of the CZK (+0.3% vs. USD) and HUF (+0.1%) have continued to outperform.
After a very quiet week, the local story is back in focus for markets. Today, we will see retail sales in Poland for January. Goods spending remains subdued, but has improved after a poor third quarter.
