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Koruna Slips But Multi-Year Highs Remain In Play

CZK

EUR/CZK has advanced amid broader unwind of yesterday's EMFX strength, although it has now eased off session highs (CZK23.368). The rate last changes hands +0.056 at CZK23.324 and topside technical focus falls on Mar 28 high of CZK23.820. Bears keep an eye on CZK22.877, which limited losses on Jul 21, 2008.

  • BNP Paribas said that yesterday's CPI data "set the stage for a 50bps start" to cuts in Czech interest rates in Q4, while JP Morgan said that the data reaffirms their call for rate cuts from Q3, which nonetheless "hangs by a thread" due to a "very hawkish-sounding CNB." Goldman Sachs and NatWest both continue to expect the CNB to remain hawkish.
  • Czechia's FRA curve has shifted higher over the past few sessions as CNB rhetoric pointed to the need to keep monetary policy tight, with the central bank ready to react if hawkish risks materialise.
  • CZGB yields sit 1.4-5.9bp higher across the curve, with local-currency bonds lagging their CE3 peers. The PX index has added ~0.7% and showed at its highest point since Mar 7.

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