Key events in EMEA next week

ING Global Economics Team ING Economic and Financial Analysis

As the latest inflation numbers were well below the Czech National Bank's forecasts, we believe the CNB repo rate will remain unchanged at 7%. For Hungary, although another 100bp increase is on the table, we favour a 75bp hike right now due to the combination of a lower CPI peak and worse GDP outlook.

Czech Republic: Rates should remain unchanged again

Next Thursday, the second monetary policy meeting will be held under the leadership of the new CNB board. Nothing has changed in our forecast since the last meeting and we expect rates to remain unchanged this time, too. This is indicated by both the statements of the board members and the latest inflation numbers, which were well below the CNB's forecasts in July and August. The same result can be expected from the September number (our preliminary forecast is for 17.6% year-on-year). On the other hand, the GDP and wage numbers were higher than the CNB's forecast, but we still believe that lower-than-expected inflation provides an ample buffer for the current board. Thus, we do not see a significant risk of a change in the current CNB view for the coming months, which means that this hiking cycle is done. Read our full CNB preview here.

Hungary: A 75bp hike is expected on Tuesday

The main event of next week in Hungary is the rate-setting meeting of the National Bank of Hungary. We narrowly favour a 75bp hike on Tuesday, taking the Bank Rate to 12.50%, although another 100bp is clearly on the table. The government's decision to prolong price cap measures for basic food and fuel will lower the near-term CPI peak, somewhat limiting concerns about consumer inflation expectations becoming extreme. Moreover, the introduction of liquidity draining measures and the expected improvement in the monetary transmission mechanism reduce the urgency to continue tightening in 100bp increments. The latest official communication, which pointed out that the CPI peak might be near - a milestone in this tightening cycle - could also be a sign of a possible slowdown in the pace of hiking. We also see the central bank revising its GDP outlook significantly downward in 2022 and 2023, providing another talking point for reducing the size of rate increases. However, decision-makers might be worried about the vulnerability of the forint, and will also argue that the government’s latest support package (prolonged mortgage rate freeze, energy bill and investment support to energy-intensive SMEs, investment support to large energy-intensive factories and a job protection action plan) could increase medium-term inflation given it reduces the risk of recession. If these latter arguments are taken into account with greater weight, we see a chance for a 100bp hike next week. That means it’s a close meeting to call. Read our full NBH Preview here.

Key events in developing markets next week

Source: Refinitiv, ING

Read the original analysis: Key events in EMEA next week

Author

ING Global Economics Team

ING Economic and Financial Analysis

From Trump to trade, FX to Brexit, ING’s global economists have it covered. Go to ING.com/THINK to stay a step ahead.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.