CZK: Koruna In Retreat Ahead Of Thursday's CNB Rate Decision

EUR/CZK has posted decent gains today, with pre-CNB positioning potentially playing a role. The broader CE3 FX space is underperforming but the koruna lags behind its regional peers (HUF, PLN). Most analysts surveyed by Bloomberg (20/25) expect a 25bp rate cut tomorrow. However, most also admit that it is a close call, with another 50bp rate cut also firmly on the table, as explained in our comprehensive preview.

• The ambiguous, inconclusive messaging from Czech policymakers in the lead-up to the meeting (several of them signalled that they will go into the meeting with open minds about the outcome) might be stimulating volatility ahead of the decision itself, with market participants possibly migrating between the 25bp and 50bp camps.
• EUR/CZK trades +0.102 at 24.926 as we type, with bulls looking to attack Jun 21 high/round figure of 24.994/25.000 to confirm that they have the upper hand. Bears keep an eye on the 200-DMA (24.831) and Jun 7 low of 24.537.
• CZGB yields are last slightly higher; The Finance Ministry sold CZK5bn of 2033 bonds (bid/cover 1.18x), CZK3bn of 2035 bonds (bid/cover 1.79x) and CZK1bn of 2040 bonds (bid/cover 1.95x).
• The PX Index has extended recent gains but is yet to test the nearby 50-DMA.