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27 Mar 2014
EMEA EM Express: South African Reserve Bank and Czech National Bank on hold in March
FXStreet (Łódź) - Two EMEA central banks held monetary policy meetings on Thursday and both, the Czech National Bank and the South African Reserve Bank decided to keep interest rates unchanged.
The South African Reserve Bank kept the benchmark rate steady at 5.5% in March, after hiking it from 5% in January. It was a close vote with three MPC members in favor of a rise and four preferring to hold, while Governor Gill Marcus signaled a hike in the future.
“The domestic economic outlook remains subdued amid continued strikes in the platinum sector and uncertainty regarding a stable and sufficient electricity supply in the coming months,” the MPC said in the statement released after the decision was announced. “While the most recent inflation forecasts suggest marginal improvements in the medium term,upside risks to the inflation outlook persist despite the recent appreciation of the rand, which remains vulnerable to shifts in global risk sentiment and adverse domestic developments. Together with downside risks to growth, this continues to pose a dilemma for monetary policy.”
According to the central bank's estimates South African inflation should average 6.3% in 2014, while the GDP forecast was reduced to 2.6% from 2.8%.
The next SARB monetary policy meeting is scheduled for May 22, but the BBH Global Currency Strategy Team are skeptical about it being the right moment for the next hike.
“A lot depends on conditions (both external and internal),” they believe. “If the EM rally continues in Q2, it seems very likely that USD/ZAR breaks below 10.50 to trade in a lower range. The urgency to hike should ebb a bit if this happens.”
The monetary policy meeting of the Czech National Bank concluded with a decision to keep the benchmark rate unchanged at 0.05%, as widely expected.
The CNB Bank Board also announced that it would “continue using the exchange rate as an additional instrument for easing the monetary conditions” and reiterated that the CNB was ready to “intervene on the foreign exchange market to weaken the koruna so that the exchange rate of the koruna against the euro is kept close to CZK 27/EUR.”
Meanwhile, Ukraine has struck a deal with the IMF on a rescue package of 14-18 billion dollars for the next two years. The agreement also unlocks a 27 billion dollar international aid program for the country.
Economic data
Month-on-month South African Producer Price Index for February came in above expectations of +0.8% at 1.3% and up from the January reading of 1%, according to data released on Thursday by the Statistics South Africa Head Office. On an annual basis the indicator grew 7.7%, following the previous result of +7%.
Also on Thursday the Central Bank of the Russian Federation informed that its reserves decreased to USD 486.60B from USD 493.20B.
Technicals
On Wednesday USD/ZAR fell by 0.69% to 10.6302. The daily USD/ZAR FXStreet Trend Index was slightly bearish, and the OB/OS Index neutral. RSI was neutral at 44.4040 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 785 pips, with ATR (14) shrinking at 1417 pips. The 1D 200 SMA was at 10.3187, while the 1D 20 EMA at 10.8021.
“For USD/ZAR, support seen near 10.50, while resistance seen near 11.00,” the BBH Global Currency Strategy Team suggest.
USD/CZK dropped 0.11% to 19.8830. The daily USD/CZK FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was at 53.2127 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 1001 pips, with ATR (14) shrinking at 1401 pips. The 1D 200 SMA was at 19.7033, while the 1D 20 EMA at 19.8385.
In the opinion of the BBH Global Currency Strategy Team “For EUR/CZK, support seen near 27.30 and then 27.00, while resistance seen near 27.50 and then 27.75.”
The South African Reserve Bank kept the benchmark rate steady at 5.5% in March, after hiking it from 5% in January. It was a close vote with three MPC members in favor of a rise and four preferring to hold, while Governor Gill Marcus signaled a hike in the future.
“The domestic economic outlook remains subdued amid continued strikes in the platinum sector and uncertainty regarding a stable and sufficient electricity supply in the coming months,” the MPC said in the statement released after the decision was announced. “While the most recent inflation forecasts suggest marginal improvements in the medium term,upside risks to the inflation outlook persist despite the recent appreciation of the rand, which remains vulnerable to shifts in global risk sentiment and adverse domestic developments. Together with downside risks to growth, this continues to pose a dilemma for monetary policy.”
According to the central bank's estimates South African inflation should average 6.3% in 2014, while the GDP forecast was reduced to 2.6% from 2.8%.
The next SARB monetary policy meeting is scheduled for May 22, but the BBH Global Currency Strategy Team are skeptical about it being the right moment for the next hike.
“A lot depends on conditions (both external and internal),” they believe. “If the EM rally continues in Q2, it seems very likely that USD/ZAR breaks below 10.50 to trade in a lower range. The urgency to hike should ebb a bit if this happens.”
The monetary policy meeting of the Czech National Bank concluded with a decision to keep the benchmark rate unchanged at 0.05%, as widely expected.
The CNB Bank Board also announced that it would “continue using the exchange rate as an additional instrument for easing the monetary conditions” and reiterated that the CNB was ready to “intervene on the foreign exchange market to weaken the koruna so that the exchange rate of the koruna against the euro is kept close to CZK 27/EUR.”
Meanwhile, Ukraine has struck a deal with the IMF on a rescue package of 14-18 billion dollars for the next two years. The agreement also unlocks a 27 billion dollar international aid program for the country.
Economic data
Month-on-month South African Producer Price Index for February came in above expectations of +0.8% at 1.3% and up from the January reading of 1%, according to data released on Thursday by the Statistics South Africa Head Office. On an annual basis the indicator grew 7.7%, following the previous result of +7%.
Also on Thursday the Central Bank of the Russian Federation informed that its reserves decreased to USD 486.60B from USD 493.20B.
Technicals
On Wednesday USD/ZAR fell by 0.69% to 10.6302. The daily USD/ZAR FXStreet Trend Index was slightly bearish, and the OB/OS Index neutral. RSI was neutral at 44.4040 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 785 pips, with ATR (14) shrinking at 1417 pips. The 1D 200 SMA was at 10.3187, while the 1D 20 EMA at 10.8021.
“For USD/ZAR, support seen near 10.50, while resistance seen near 11.00,” the BBH Global Currency Strategy Team suggest.
USD/CZK dropped 0.11% to 19.8830. The daily USD/CZK FXStreet Trend Index was slightly bullish, and the OB/OS Index neutral. RSI was at 53.2127 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 1001 pips, with ATR (14) shrinking at 1401 pips. The 1D 200 SMA was at 19.7033, while the 1D 20 EMA at 19.8385.
In the opinion of the BBH Global Currency Strategy Team “For EUR/CZK, support seen near 27.30 and then 27.00, while resistance seen near 27.50 and then 27.75.”