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CZK: JP Morgan Take Profit on Long EUR/CZK Trade

CZK
  • Last week’s downside inflation surprises in the Czech Republic and the US have supercharged JP Morgan’s bullish rates/bearish FX views in Czech local markets, but after fast and sharp moves, they see less appealing valuations and expect weaker momentum.
  • In FX, JP Morgan take profit on long EUR/CZK entered on May 8 (entry: 25.048, exit: 25.378, total return: +1.08%) and cut in half their CZK UW in the GBI-EM Model Portfolio. They note that FX depreciation momentum is now likely to slow without the rates impulse.
  • JP Morgan still hold a structurally bearish view on the koruna (rich valuations and a weak economic backdrop), but note that it has paid to be tactical with entry and exit points. They therefore keep an UW CZK stance in the GBI-EM Model Portfolio, but halve the size.

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