China's Refining Industry Faces Major Shakeup Amid Challenges 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
RBA Raises Interest Rates by 25 Basis Points as Inflation Pressures Persist 
New York Fed President John Williams Signals Rate Hold as Economy Seen Strong in 2026 
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
OCBC Raises Gold Price Forecast to $5,600 as Structural Demand and Uncertainty Persist 
Wall Street Analysts Weigh in on Latest NFP Data 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Fed Confirms Rate Meeting Schedule Despite Severe Winter Storm in Washington D.C. 
In this write-up, we emphasize on shorting in EURCZK via 3-month forwards, which is currently trading at 25.6214. We target a 4% move lower to 24.5965 and place a stop loss at 26.0057. Our trade horizon is 6-12 months. The position is carry-neutral.
Although the Czech National Bank (CNB)’s board delivered a 25bp hike in the 2-week repo rate on 2 November, in line with our expectations and those of the market, investors were disappointed by the flattish staff forecast for 3M PRIBOR in 2018 and by the guarded tone of Governor Rusnok’s press conference. These contrasted with hawkish pre-meeting comments of several members of the Board and staff, some of whom had openly contemplated the possibility of a 50bp hike. CZK to appreciate through 2018 while CNB continues a measured hiking cycle.
We believe that measured monetary policy tightening will continue in 2018 in response to the Czech Republic’s robust economic expansion. Supporting our outlook, CNB chief economist Tomas Holub said on 3 November that the CNB targets a gradual normalization of monetary policy rates.
Hence, we anticipate four interest rate hikes next year (of 25bp each), with EURCZK sliding lower to 24.70 by year-end 2018: CNB projects strong CZK appreciation.
As re-emphasized today in the CNB’s presentation to analysts, the widening interest rate differential between the Czech Republic and Euro-area/regional economies as well as the ECB’s QE extension should result in sharp CZK appreciation in 2018 via monetary policy divergence.
