Koruna Tad Firmer, CNB Decision Eyed

EUR/CZK treads water ahead of tomorrow's monetary policy decision from the Czech National Bank (CNB). The rate rejected its 50-DMA yesterday and moved away from there before stabilising this morning. It last trades at 25.232, marginally higher on the session, holding comfortably above the CNB's forecast for 1Q2024 (24.700). From a technical perspective, a move through the 50-DMA and the round figure of 25.000 would bring Jan 2 high of 24.867 into play. Conversely, bulls see Feb 15 high of 25.519 as their initial target.

• Most analysts expect the Bank Board to lower the two-week repo rate by a further 50bp, extending the current easing cycle (-25bp in Dec 2023, -50bp in Feb 2024). However, one dissenter in a Bloomberg survey calls for a 75bp cut, while some sell-side analysts flagged dovish risks to their forecasts. Click here to see our preview of the decision.
• On the political front, the focus in Czechia is on the Chamber of Deputies, which will hold an extraordinary meeting on leaked emails in which opposition leader Andrej Babis asked his aides to collect information about Foreign Minister Jan Lipavsky. The governing coalition will try to use the controversial topic to undermine ANO's support ratings, with the party holding its front-runner position in all opinion polls.