/CZK: CEE Pair Extends Gains Amid Divergence In Monetary Policy Paths

PLN/CZK rose to its best levels since mid-2021 yesterday, refreshing these cyclical highs this morning. The rate last deals at 5.6607, little changed on the session, with the RSI operating just shy of the threshold of overbought territory. Bulls look for renewed gains towards the 38.2% retracement of the 2015 - 2023 sell-off/round figure of 5.6995/5.7000.

• The zloty continues to draw support from post-election optimism around the potential for an improvement in Poland's relations with the EU, as well as the NBP's apparent hawkish pivot, with the central bank seen keeping rates on hold at least until March and possible longer. This stands in contrast with the imminent start of the CNB's easing cycle, with Jan Prochazka flagging arguments against postponing rate cuts further. The Czech Bank Board will hold its final monetary policy meeting of 2023 next week. The hawkish NBP/dovish CNB combination represents a reversal of a dynamic seen earlier this year, when the Polish central bank delivered aggressive monetary easing while its Czech counterpart kept signalling caution and concern over persistent pro-inflationary risks.