Koruna Draws Support From Retail Sales Beat & CNB Speak

EUR/CZK trades -0.033 at 25.288 as local data and CNB speak provide some interest. Technically, familiar levels remain in play, with bears looking for a dip through the 25.000 figure and towards Jan 2 high of 24.867, while bulls take aim at Feb 15 cycle high of 25.519.

• Czechia's ex-auto retail sales rose 2.4% Y/Y in January, per data released this morning by the CZSO, topping BBG median estimate of +0.5%. This may have lent some support to the koruna, which resumed gains after the release of the data. Komercni banka commented that the report "points to a continued upward trend in consumer demand," while "the return of inflation to the CNB's two percent target can have a psychological effect." Still, they expect the recovery in consumer spending to be gradual.
• That being said, it was an interview with CNB Deputy Governor Eva Zamrazilova that set the tone for early CZK trade. The official played down the potential for more aggressive monetary easing from the Czech central bank, noting that she will likely decide between backing a 25bp cut and a 50bp cut next week, chiefly due to the weak exchange rate and persistent price pressures in the services sector.
• CNB's Kubicek then said that he was likely to back another 50bp rate cut next week, adding that the repo rate will likely finish the year at around 4.00%. He also said that overall inflation risks have shifted to neutral since the February policy meeting.
• CZGB yields are a tad higher across the curve, while the PX Index has added 0.7% so far.