Key events in EMEA and Latam next week

In Hungary, we are looking for a further acceleration of PPI, as in Germany and China. Across Europe, 'soft' economic indicators have been mixed but we believe Hungary will be on the brighter side, with manufacturing PMI posting an increase - particularly because of recently announced new capacity, which should fuel optimism. Retail sales are to remain strong; we see a significant contribution from consumption in the 2Q18 GDP reading.

We expect July inflation at 0.9% pulling the annual figure up to 16.3% from 15.4%. This is due to the recent sharp increase in price pressures from the FX pass through, upward pressure from domestic PPI and unsupportive base effects.

We were rather sceptical a few weeks ago that the Czech National Bank (CNB) would deliver another rate hike following the one in June. But the latest comments from CNB representatives suggest that another hike next week is slightly more likely than remaining on hold.

Indeed, Chief Economist Tomas Holub signalled such a huge change in the recent staff forecast (due to the weak koruna) that even less hawkish board members might be persuaded to vote for another 25 basis point rate hike in August. This message from the chief economist had only limited impact on CZK, remaining above the 25.6 EUR/CZK level. Some board members might feel uncomfortable tightening monetary conditions just one month after a previous hike and might decide to remain on hold to see if weak CZK assumptions persist. The likelihood seems to be skewed to a hike now, which has become our base case.