The Czech National Bank (CNB) announces its interest rate decision at 13:30 GMT and follows up with a press conference at 14:45 GMT. It will also release its Winter forecast update. Economists at ING forecast the EUR/CZK at the 24.00 level.
No major reasons for a big NZK sell-off
“Most are expecting a 75bp hike today to take the policy rate to 4.50%. It would be quite a hawkish surprise were 5%+ policy rates to be shown in the CNB's forecast today. How high could the CPI forecast be revised? To 7, 8% or higher? And the market will be interested to look at the CNB's expected profile for EUR/CZK. Back in November the CNB was forecasting that EUR/CZK would be trading towards the low 24s through 2022 – and here we are today! Will this forecast now pencil in substantially sub 24 levels for later in the year?”
“The CZK has been a solid EMFX performer this year and we cannot see any major reasons for a big sell-off today.”
“With: i) EUR/USD enjoying new-found support from the ECB (a steady/higher EUR/USD typically sees CE3 currencies out-perform), ii) the CZK now seriously interesting for FX reserve managers with 4%+ rates and iii) probably renewed foreign interest in Czech government bonds as we approach the top of the tightening cycle, EUR/CZK looks firmly on course to 24.00.”
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