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Koruna Advances Amid Limited Scope For Near-Term CNB Easing Despite Weak M'fing PMI Print


EUR/CZK remains heavy as the risk-on impulse generated by positive Chinese data overnight applies supports EM FX space. The Koruna has strengthened, with yesterday's surprisingly strong outturn for Czechia's factory-gate inflation possibly helping counter a soft local M'fing PMI print from this morning. In the grand scheme of things, the CNB's backstop against CZK depreciation continues to prevent any meaningful pullback in the currency.

  • Czechia's S&P Global Manufacturing PMI unexpectedly weakened to 44.3 from 44.6 prior, even as analysts expected an improvement to 45.0. Local manufacturing firms were facing "energy costs, inflation and economic uncertainty," albeit "inflationary pressures softened notably."
  • Market participants appear to have trimmed their bets on interest-rate cuts this year amid a slight upward adjustment of the local FRA curve over the past few weeks. While the CNB is expected to maintain interest rates at the current levels in the near-term, there is ongoing debate surrounding the timing of the subsequent easing.
  • EUR/CZK last trades -0.079 at CZK23.417. From a technical standpoint, the next key bearish target is provided by CZK22.877, which limited losses on Jul 21, 2008. On the flip side, bulls look for a rebound above the 50-DMA at CZK23.878.
  • Czechia's budget balance for February will hit the wires later in the day.

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