Koruna Loses Ground, Regional Central Bank In Focus

EUR/CZK has crept higher in morning trade, moving away from its worst levels since Sep 7. Elsewhere in the region, the zloty has come under pressure, while the forint outperforms in EMEA FX space ahead of the local rate decision. When this is being typed, EUR/CZK trades +0.038 at 24.390, with bulls looking for gains towards Sep 12, 2023/Sep 29, 2022 highs of 24.659/24.700. Conversely, the 23.6% retracement of the YtD upswing provides the initial layer of support at 24.316.

• The CNB is widely expected to keep interest rates unchanged tomorrow, despite expectations that headline inflation could approach the +2% Y/Y target in 1Q2024. The central bank has been pushing against dovish market pricing and trying to emphasise its cautious stance. However, policymakers will likely discuss its options for future monetary easing.
• This weekend's general election in neighbouring Slovakia has sparked some concern in Czechia, with President Petr Pavel warning that bilateral relations would probably deteriorate if SMER's Robert Fico returns to power. Responding to these comments, Fico accused Pavel of election interference in a signal of tense atmosphere ahead of the crucial poll.