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Will The CNB Mark A Pause In Its Tightening Cycle?

CZECHIA
  • Today was the last meeting for CNB governor Rusnok, who will soon be replaced by 'dove' Ales Michl (taking over in July).
  • With the new board pivoting to a more 'dovish' stance, CZK may weaken slowly against major crosses (i.e. EUR) as uncertainty over policy outlook could weigh on the koruna.
  • Some sell-side analysts are expecting a pause following today's decision, as further tightening will accelerate the economic slowdown.
  • The chart below shows that the dramatic tightening in financial conditions (i.e. 2Y change in 2Y yield) has been pricing in a significant deceleration in the economic activity in the coming months.
  • CNB will hold press conference at 3.45pm CET; EURCZK may rise if the conference happens to be a non-event.
  • Key resistance to watch on EURCZK stands at 24.9250 (200DMA).

Source: Bloomberg/MNI

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