Koruna to strengthen further as offers decent risk/reward – ING

EUR/CZK moved below 23.60 for the first time since the sell-off in global markets two weeks ago after CNB's hawkish tone. 

Koruna welcomes hawkish Czech National Bank

“The CNB board decided to keep the key interest rate at 7.00%. The governor commented on market expectations of a peak in interest rates at current levels and a significant rate cut this year (roughly 125 bps in cuts priced in before the meeting). However, according to the governor, a rate hike cannot be ruled out and rate cut expectations are premature at this point.”

“The central bank has confirmed that it is ready to intervene if needed, but current levels are far from where the CNB was last active. On the other hand, the central bank's statement is clearly supportive for the Koruna and implies that the currency is safe in the event of a global sell-off. Moreover, with the prospect of higher rates for a longer period of time, a solid FX carry is also certain.” 

“The Koruna offers decent risk/reward and we expect it to strengthen further.”