KBC Market Research Desk
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The CNB set to reaffirm its exchange rate commitment
Is the 27.00 EUR/CZK test still on the table?
CNB Board meeting stands as a candidate for the highlight of today´s CEE market sessions. After a longer pause, Czech economic data including inflation started to surprise on the upside - to astonishment of both markets and the CNB. Today, the CNB Board will be deciding in a situation, when inflation is higher than CNB projections have presupposed. Since introduction of the intervention regime in November 2013, Czech koruna investors and traders have monitored closely the development of Czech macroeconomic indicators and have carefully analysed Bank Board´s responses to differences between predicted and actual values of economic indicators. Our evidence suggests that when the macro (inflation) data positively surprised prior to the CNB meeting, the koruna tended to strengthen slightly even after it.
A similar development may occur today. We expect central bankers to reaffirm their exchange rate commitment and to mention possibility of its repeated prolongation. Nevertheless this should hardly weigh on the koruna. If the Board does not start to discuss introduction of negative deposit rates, the currency will still be tempted to test willingness of the CNB to defend the 27.00 EUR/CZK level.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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