Koruna On Defensive Ahead Of CNB Rate Decision

The CNB will steal the limelight today, with the rate decision coming up at 13:30BST/14:30CEST. Interestingly, market pricing indicates slightly weaker conviction among traders than would be suggested by the unanimous sell-side call for a 50bp rate cut (several notes circulated earlier this week suggested that a ~35bp move was priced in). That said, another half-point cut seems to be the most likely scenario for this meeting, with some familiar hawkish rhetoric expected from Governor Michl.

• Czechia's S&P Global Manufacturing PMI fell to 44.7 in April from 46.2, missing the consensus forecast of 46.7. Accompanying commentary pointed to "input costs increasing at the steepest rate in over a year," which forced firms to "partially pass this through to consumers." Still, "a subdued sales environment led to only a fractional uptick in charges, albeit the first in 12 months." S&P added that they continue to expect another 50bp cut to the repo rate at today's CNB meeting.
• The Finance Ministry will release April budget data at 13:00BST/14:00CEST. These reports have gained some more scrutiny amid the government's efforts to reduce Czechia's fiscal burden.
• Against this backdrop, EUR/CZK trades +0.055 at 25.136. Bulls look for gains past the 50-DMA (25.278) and towards Feb 15 high (25.519). Bears look for a sustained move below the 25.0 figure.
• Czech bonds are firmer across the curve; the PX Index has added 0.4%.