ING’s Frantisek Taborsky flags that a new interview with the Czech National Bank governor underlines a dovish tilt despite talk of possible hikes. Markets still price about three hikes over 12 months, but with EUR/CZK stuck in a 24.300–24.400 range, weaker global sentiment and a cautious CNB are expected to push the cross towards the upper end.

CNB rhetoric keeps koruna contained

"The market has, since the last meeting, perceived the CNB more dovishly, but still prices in about three rate hikes in the 12-month horizon, similar to the NBP."

"This morning, we also saw an unusual interview with the governor for local media, where there was also a discussion about fiscal policy, which sees some widening of the deficit this year. This could potentially support inflation, according to the governor, but again we hear similar dovish arguments as before, such as that the CNB rate is quite high above inflation or the ECB rate."

"For our economists, the baseline remains no change, and at the same time, the prospect of lower inflationary pressures in the coming months, thanks to the base effect, keeps us confident that the CNB will remain calm for now. Similar to Poland, the currency has remained largely unchanged over the last few weeks in the EUR/CZK 24.300-400 range."

"The market is seeing some deterioration in global sentiment again this morning, which, together with a dovish central bank, should have led the currency to the upper end of the range."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)