Koruna Depreciation Trend Continues, Participants On Lookout For Any Pre-Blackout CNB Speak

EUR/CZK posted another leg higher this morning, extending the recent trend of sharp koruna depreciation. The Czech currency has been the worst performer in the region, despite the absence of notable headline catalysts at home. Friday saw the first close above the 24.00 level since mid-March, which may have supported bullish interest.

• When this is being typed, EUR/CZK trades +0.108 at 24.126, having tested key resistance from Mar 17 high of 24.137. A clean break above that level would open up Dec 30, 2022 high/23.6% retracement of the 2020-2023 sell-off at 24.336/24.341.
• This week's Fed & ECB monetary policy meetings will be closely watched ahead of the CNB's rate decision next week (August 3). As a reminder, the CNB's "blackout" period will start on Wednesday, one week before the Bank Board announces its decision.
• CNB Dep Gov Zamrazilova's recent comments the currency (further depreciation expected, possibly by one koruna over a year) have been interpreted as a potential signal that the central bank is preparing to withdraw from its FX commitment.
• Ceska Sporitelna wrote this morning that "Zamrazilova's statement could indicate that the end of the active use of interventions as a tool to reduce inflation is coming." CSOB said that EUR/CZK returned above 24.00 due to her comments.