Koruna Weakens, Retail Sales Shrink

EUR/CZK staged a firm rebound yesterday, extending that move this morning amid broader greenback strength. The pair last changes hands +0.051 at 24.604, with topside technical focus falling on Oct 26/Jul 7 highs of 24.747/24.797. Bears see the 24.3 area as the key initial layer of support.

• The CNB's international reserves eroded to $136.9bn in October from $138.4bn prior, according to the latest update from the central bank. The CNB sold an equivalent of $293.6mn on the FX market in September, up from $114.2mn in August, under the renewed programme of FX returns sales. Komercni banka noted that the EUR277mn of sales of proceeds from FX reserves was slightly below the EUR300mn ceiling mentioned by CNB Dep Gov Zamrazilova.
• In addition, Komercni banka wrote that in the short-term, factors causing koruna depreciation will likely prevail, but could be dampened by the delay of the first CNB rate cut until February 2024. They expect koruna to start appreciating again only from 2H2024 as domestic economy recovers and the USD begins to weaken.
• Elsewhere, Czechia's ex-auto retail sales fell 4.0% Y/Y in September, missing the -3.7% consensus call, after a 2.8% contraction registered in the previous month.