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Goldman Sachs Look to Gauge Strength of CNB Pushback for FX Going Forward

CZECHIA
  • Ahead of this week's CNB decision, Goldman Sachs write that the bank's preference for a stronger currency has been a crucial anchor and has allowed for a trend move lower in EUR/CZK.
  • This week's decision will be an opportunity for the CNB to push back against the market pricing of rate cuts by year-end, consistent with recent communication from CNB Board members.
  • Even if the CNB pushes back against the degree of rate cuts priced in the market, if it still expects to cut rates later this year, this would imply FX strength is also no longer necessary to tighten financial conditions.
  • Therefore, the key will be how forceful this pushback on market pricing is. GS will be looking to see if there are any specific mentions to the Koruna and whether the statement will maintain that the CNB will continue to prevent excessive FX fluctuations.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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