Koruna Corrects Recent Losses, CNB Speak Under Scrutiny

EUR/CZK is correcting its recent sharp rally, although the psychological 24.00 figure holds firm so far, amid reflections on the drivers of the earlier koruna sell-off coupled with some fresh hawkish CNB comments. The rate last deals -0.107 at 24.016 and a return below 24.00 would allow bears to target support area around the 23.745 level. Bulls look for renewed gains past Dec 30, 2022 high/23.6% retracement of the 2020-2023 sell-off at 24.336/24.341.

• ING joined the choir of sell-side desks attributing recent koruna depreciation to the well-documented comments from CNB Dep Gov Zamrazilova. However, they argue that the official did not intend to signal the imminent end of the FX quasi-commitment. They think that the CNB "must be unhappy about the current EUR/CZK levels" and "24.00 is the pain threshold for the central bank."
• Meanwhile, CNB's Jan Prochazka pushed back against "too optimistic" markets bets and said that he can't imagine consensus forming in the Bank Board around a rate cut as soon as this year.
• CZGB yields and Czech FRAs pushed higher as Prochazka's comments crossed the wires, with local interest-rate markets sensitive to any pre-blackout CNB speak.