Koruna Depreciates In Anticipation Of CNB Rate Decision

The perceived increase in the probability of a bolder move by the CNB this week may have helped apply some pressure to the koruna, making it the second worst performer in the EMEA space since dovish comments from Tomas Holub and Jan Frait crossed the wires early last week. As a result, EUR/CZK yesterday tested the territory above the psychologically significant 25 figure for the first time since mid-2022.

• From a technical standpoint, the 25 threshold mark a significant line in the sand and is immediately followed by the 38.2% retracement of the 2020 - 2023 bear leg at 25.043. Conversely, bears initially look for a pullback below 24.621, which capped gains on Jan 2. At typing, EUR/CZK deals +0.026 at 24.985.
• Another set of data released out of Czechia today completed the picture of an underperforming economy. Industrial output fell 0.4% Y/Y in the full 2023, which was the worst result since the pandemic year of 2020. Energy-intensive sectors took the heaviest losses, despite the recovery in the automotive sector.
• The CNB will announce its monetary policy decision on Thursday, which will be followed by a press conference with Governor Ales Michl. Our preview with a summary of sell-side views is forthcoming.