No near-term rate hike from the CNB

- Market movers ahead: A couple of strong Polish releases are due next week "Next week’s calendar is very light. The most interesting items on the agenda are likely to be a number of Polish economic releases due on Tuesday and Friday, which should all show positive signs for the Polish economy. Polish core inflation should confirm the fact that inflationary pressure is still not an issue in Poland. We expect core inflation to remain unchanged at 1.2% y/y in August. On Friday we expect data on Polish retail sales to come out on the positive side, increasing to 4.5% y/y in August compared with 3.9% y/y in July. Also due on Thursday is the rate decision in the Czech Republic and minutes from the latest monetary policy meeting in Poland."
- Fixed income outlook: CNB rate decision "On Thursday next week the Czech central bank (CNB) has its rate setting meeting. We do not expect this to be a major event as we expect the CNB to keep its key policy rate unchanged at an historical low of 0.75%. Overall, we expect the CNB to maintain a rather neutral tone, as we do not see any changes to Czech monetary policy for some time."
- FX outlook: EUR/USD should set the tone "As the calendar does not hold many potential market movers we do not expect much activity on the EMEA FX markets in the coming week. The key driver could be a further move up in EUR/USD, which will be positive for the euro-sensitive CEE currencies."
- Scorecard-based trade of the week: buy ILS/ZAR "For the fifth week in a row, the highest-scoring currency in our EMEA FX Scorecard is the Israeli shekel, while the lowest-scoring is the South African rand. Therefore, we continue to recommend buying ILS/ZAR, based on our EMEA FX Scorecard."

DenDanske EMEA Weekly 20100917

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