CZK eased as a result of the publication of the September inflation data, as it fell much more significantly than expected from 8.5% to 6.9% yoy. From the market’s point of view that gives the Czech central bank (CNB) more scope to cut interest rates earlier than expected after all.

Let’s wait and see how the board members will position themselves at the next rate meeting in early November. No doubt they will continue to act cautiously as the fall in inflation in September was mainly due to regulated prices (energy) and the fight against price risks is not yet over. After all oil prices are rising again and the labour market remains tight. As a result, it is therefore very questionable in my view whether the willingness to cut interest rates will rise. Therefore, if the market has to correct its expectations again CZK will likely be able to correct its losses.