Markets
The overall (risk-off) repricing due to the military action of the US and Israel against Iran continues along the same lines already set out yesterday. Energy availability and the potential economic damage from higher oil and gas prices are the yardstick for global markets’ trading. The European Dutch gas reference contract (TTF) this morning jumped another 30%, almost doubling from levels seen no longer than 10 days ago (currently off intraday top but still at €56p/Mwh compared to less than €30/mwh 10 days ago). Brent also extends its ascent ($84/b). Higher energy prices in the post-Covid/energy crisis era are making it difficult for central banks who are in the fine-tuning phase of easing (like the Fed or the Bank of England, also most CEE countries) to walk the final mile to neural. For others that have already reached a neutral level (including the ECB), markets ponder whether they might be forced to hike sooner than expected. Eco data in this context might be considered coming from a previous era/being outdated. Even so, higher than expected February EMU CPI’s evidently didn’t help to ease concerns. EMU headline inflation unexpectedly jumped 0.7% M/M raising the Y/Y measure to 1.9% from 1.7% (unchanged expected). Core inflation 2.4% (from 2.2%), services inflation (0.8% M/M and 3.4% from 3.2%) as well as non-energy industrial goods prices (0.7% M/M and 0.7% Y/Y from -2.4%) all accelerated. ECB chief economist Lane already openly acknowledged inflation risks from higher energy prices. ECB’s Villeroy advocated that the ECB won’t decide on interest rates based just on energy prices. Even so, markets clearly feel in what direction the monetary pendule swings. The German yield curve again bear flattens with yields adding between 11 bps (2 & 5-y) and 5 bps (30-y). Markets already price a 50% probability of an ECB rate HIKE by year-end. Something else to keep an eye on: intraday EMU spreads, which were a place of almost absolute calm of late also start widening (Greece +6 bps; France +5 bps and Italy + 7 bps vs Germany). The US yield curve shows a similar, slightly more modest flattening move adding between 8 bps (2-y ) and 5 bps (30-y). Higher inflation/risk premia and stagflationary fears hammer equities across the board. The Eurostoxx 50 (-3.8 %) already trades >7% off last week’s record. US indices this time don’t escape anymore as was the case yesterday. opening with losses of about 2%. More of the same also on FX markets. The dollar has the upper hand with DXY rising 0.9% to 99.3, nearing the YTD top (99.50 area). The yen weakens (modestly) against the dollar (USD/JPY 157.85) but outperforms the euro (EUR/JPY at 182.75 from 184). EUR/USD is (at risk of) breaking the YTD low (1.1573). On CEE markets, a risk-off correction in the likes of the CZK (EUR/CZK 24.38 from 24.27), the forint (EUR/HUF 389.5 from 380) and the zloty (EUR/PLN 4.29 from 4.24) deprives regional central banks from their room to consider further easing anytime soon. First reality check tomorrow with the NBP policy decision. In the UK Chancelor of the Exchequer Reeves today revealed a (skeleton) budget update. The OBR slightly downwardly revised the 2026 growth forecast (1.1% from 1.4%), but sees the fiscal buffer in 2029/30 slightly higher than in November at £23.6bn (from £21.7bn). Improved finances also allow the UK Treasury to reduce bond sales next fiscal year (£252.1bn from £303.7bn this year). EUR/GBP hovers in the low 0.87 area.
News & Views
The refined estimate of Czech Q4 GDP showed an upward revision from 0.5% Q/Q and 2.4% Y/Y to 0.6% Q/Q and 2.6% Y/Y. The results slightly exceeded the Czech National Bank’s MPR Winter forecasts. In 2025 as a whole, the Czech economy grew at the fastest pace since 2022 (2.6%) with the CNB expecting a slight acceleration to 3% this year. On the demand side, details showed broad-based strength. Higher final consumption expenditure (+1.3% Q/Q & +3.2% Y/Y) and gross fixed capital formation (+1.7% Q/Q & +5.3% Y/Y) were the key factors of quarterly GDP growth. External demand (exports +0.8% Q/Q & +5.1% Y/Y and imports +0.6% Q/Q & +5.3% Y/Y)) and government consumption (+1% Q/Q & +2.5% Y/Y) also had a positive contribution while a change in inventories had a negative influence. A supply-side breakdown showed especially strong contributions from manufacturing (+2.2% Q/Q) and financial and insurance activities (+2.7% Q/Q). Construction activity (-3.3% Q/Q) acted as a drag. As for price developments, the GDP deflator increased by 1% Q/Q and 3.9% Y/Y. Total employment was unchanged in Q4 to be up 1% Y/Y. Higher energy prices and risk aversion weigh on the Czech krone today with EUR/CZK testing the upper bound of the sideways range in place since the start of Q4 2025 at 24.40. The Czech 2y swap yield extends yesterday up leg to currently trade at 3.6% (vs 3.35% close on Friday).
 repricing due to the military action of the US and Israel against Iran continues along the same lines already set out yesterday. Energy availability and the potential economic damage from higher oil and gas prices are the yardstick for global markets’ trading.){kind=link}