Meldung vom 07.08.2017

UNIQA Capital Markets Weekly

Zu dieser Meldung gibt es: 1 Bild | 1 Dokument

Kurztext (377 Zeichen)Plaintext

  • Eurozone: Growth accelerated in H1 2017; Inflation downward risks rising upon FX appreciation
  • CEE: Czech National Bank raised key policy rate for first time after FX strategy abandonment in April.; No more signal towards FX intervention to prevent potential koruna appreciation.; Possibly another rate hike and then a pause implied by CNB forecast.

Pressetext (8033 Zeichen)Plaintext

• Growth accelerated in H1 2017
• Inflation downward risks rising upon FX appreciation

In the Euro Area, economic growth accelerated during the first half of the year (Figure 1). As expected, real GDP rose by 0.6 % (q/q) and 2.1 % (y/y) after increases of 0.5 % and 1.9 % in Q1 2017. The release on Wednesday came after some Euro country-specific releases (France, Spain, Austria) had already shown strong growth in Q2. Current levels of high-frequency sentiment surveys (PMIs) suggest continuing quarterly GDP expansion of 0.5-0.6 % during the third quarter.

According to the flash estimate (Figure 2), the Eurozone consumer price inflation was 1.3 % (y/y) in July and as expected among inflation forecasters (Bloomberg consensus). The core inflation rate (excluding energy and food) inched up from 1.1 % to 1.2 % (y/y).
The EUR exchange rate has recently appreciated more than 5 % since May/June and almost 10 % since April. The currency appreciation might affect the inflation rate as lower import prices pass through to domestic consumer prices over the coming months and in 2018. Hence, current inflation projections, including the June ECB staff projections, bear risks of downward revisions. In the November 2016 Economic Bulletin , the ECB had calculated a negative pass-through effect of a 10 % EUR appreciation on inflation of 0.8 percentage points in the first year and 0.6 % percentage points in the second year. The FX effect on headline inflation appears large and is calculated by averaging estimates from different models.
To that effect, it is highly likely that the ECB staff will downgrade its inflation projections in September compared to the June forecasts (1.5 %, 1.3 % and 1.6 % for 2017 to 2019). With respect to the monetary policy decision in September, the governing council might argue to look through non-permanent effects from FX and base its decision on the core inflation (excluding energy and food prices) forecast. The FX pass-through to core prices is likely much lower than on overall consumer prices. Our back-of-the-envelope calculation would suggest a minor negative effect of 0.1-0.2 percentage points in the first as well as the second year after the impulse from the FX appreciation. Previously in June, the ECB staff had forecast core inflation of 1.4 % and 1.7 % for 2018 and 2019.

• Czech National Bank raised key policy rate for first time after FX strategy abandonment in April.
• No more signal towards FX intervention to prevent potential koruna appreciation.
• Possibly another rate hike and then a pause implied by CNB forecast.

In its meeting on Thursday 3rd August, the Czech National Bank (CNB) decided to increase the two-week repo rate by 20 basis points to 0.25 % and the Lombard rate by 25 basis points to 0.5 % and to keep the discount rate unchanged at 0.05 %. This was the first change in key interest rates since November 2012 and the decision of the CNB bank board was unanimous.
According to the new macroeconomic forecasts of the CNB, domestic inflation will stay in the upper half of the tolerance band (+/- 1 percentage point) around the 2 % target this year. Inflation pressures are currently peaking, reflecting accelerating growth in wages and economic activity. The effect of import prices will turn anti-inflationary due to subdued foreign producer price inflation and a strengthening of the koruna. Inflation will thus decrease towards the CNB’s 2 % inflation target in early 2018.
Czech GDP growth will accelerate visibly above 3 % this year, per the CNB’s projections. It will stay above this level in the following two years. Growth is driven by household consumption and a recovery in investment (due to higher drawdown of EU funds) as well as export demand.
Consistent with the forecast is an increase in domestic market interest rates in Q3 2017 and later also in the following years. However, the CNB acknowledges that the return of interest rates to their long-run neutral level will be strongly hampered until around mid-2018 by the ECB’s ongoing quantitative easing.
According to the CNB forecast, the koruna will appreciate further against the Euro. The statement says that the appreciation will be due to continued real convergence of the Czech economy, a positive interest rate differential vis-à-vis the Euro Area and ongoing QE by the ECB. However, the FX forecast does not take into account that the appreciation of the CZK may still be strongly dampened in the coming quarters by market “overboughtness”. This is due to exchange rate risk hedging by exporters before the exit from the FX commitment and the large CZK positions of financial investors. Previously, the CNB communication had stressed that the national bank stands ready to use its instruments to mitigate potential excessive exchange rate fluctuations, while there was no reference to FX market intervention in the current statement.  CNB market interventions had accelerated between January and March to prevent appreciation of the koruna from the pegged level (EUR/CZK at 27), however, monthly interventions had slowed sharply after the abandonment of the FX strategy in April (Figure 3). This seems to suggest that either the FX rate equals a fair market rate or the threat to mitigate FX volatility via interventions by the central bank worked quite well.

Since the exit from the FX strategy in April, the koruna has appreciated by around 3.4 %; largely in line with our initial take.  After this week’s interest rate decision, the CZK appreciated by less than 1 % upon announcement but reverted to the previous EUR/CZK rate later (26.1).
The CNB projects an increase in the money market rate (3 months Pribor) from currently 0.45 % to 0.65 % during Q3 (Figure 4 with confidence intervals). It is then seen to remain around 0.6 % until Q3 2018 and to rise afterwards. Hence, this would imply either none or one more increase in the key policy rates (by 20 basis points) in the September policy meeting and a pause afterwards.


Martin Ertl
Chief Economist
UNIQA Capital Markets GmbH

This publication is neither a marketing document nor a financial analysis. It merely contains information on general economic data. Despite thorough research and the use of reliable data sources, we cannot be held responsible for the completeness, correctness, currentness or accuracy of the data provided in this publication.
Our analyses are based on public Information, which we consider to be reliable. However, we cannot provide a guarantee that the information is complete or accurate. We reserve the right to change our stated opinion at any time and without prior notice. The provided information in the present publication is not to be understood or used as a recommendation to purchase or sell a financial instrument or alternatively as an invitation to propose an offer. This publication should only be used for information purposes. It cannot replace a bespoke advisory service to an investor based on his / her individual circumstances such as risk appetite, knowledge and experience with financial instruments, investment targets and financial status. The present publication contains short-term market forecasts. Past performance is not a reliable indication for future performance.

Information required pursuant to the Austrian Media Act
Publisher of this publication:
UNIQA Insurance Group AG
Untere Donaustraße 21, A-1029 Vienna, Austria
Media owner of this publication:
UNIQA Capital Markets GmbH
Untere Donaustraße 21, A-1029 Vienna, Austria
Management Board of UNIQA Capital Markets GmbH:
Dr. Andreas Bertl, Mr. Franz Hagmann
UNIQA Capital Markets GmbH is constituted as a limited liability company; the media owner is licenced as an investment firm and regulated by the Austrian Financial Market Authority (FMA-Finanzmarktaufsicht).
Ownership structure of the media owner:
UNIQA Insurance Group AG is 100% owner of UNIQA Capital Markets GmbH.
Basic tendency of the content of this publication:
Information on general economic data.


Alle Inhalte dieser Meldung als .zip: Sofort downloaden In die Lightbox legen


1.762 x 1.217


UNIQA Capital Markets Weekly (. jpg )

Maße Größe
Original 1762 x 1217 115,2 KB
Medium 1200 x 828 44,9 KB
Small 600 x 414 16,9 KB
Custom x

UNIQA Capital Markets Weekly

.pdf 314 KB