Czech Central Bank Outlook Seen Pressuring Koruna

Key Moments

CNB Meeting Seen as Pivotal for CEE Markets

ING strategist Frantisek Taborsky highlights a full calendar of Central and Eastern Europe (CEE) data, but underscores that the upcoming Czech National Bank (CNB) policy decision is the dominant driver for the region. He points to the policy rate remaining at 3.75%, with attention shifting to the tone of the communication and what it implies for the trajectory of future moves.

According to Taborsky, the CNB gathering stands out as the principal regional milestone for investors, with markets closely parsing any comments on the timing and speed of potential rate changes. He notes that the week concludes with the release of Polish industrial production data on Friday, adding to the broader CEE macro backdrop.

ING Expects Dovish Tone and Weaker Koruna

ING contrasts its expectations with what it characterizes as still-hawkish market pricing. The bank anticipates that the CNB will deliver a dovish message, which it believes should temper expectations for further tightening. In this context, ING projects additional gains in EUR/CZK.

The firm expects the euro-koruna pair to move toward 24.300 around the time of the CNB decision, with the potential for further upside if the central bank reinforces a dovish stance and if US Dollar (USD) strength persists.

Global Backdrop and Market Positioning

ING places the CNB decision within a wider global and regional context. It notes that recent US inflation figures provided some respite after a combination of rising global energy prices and a hawkish outcome from the European Central Bank (ECB) had weighed on CEE rate markets.

Despite that brief relief, ING observes that investors remain positioned more hawkishly than its economists forecast. The bank suggests that this stance is unlikely to shift meaningfully unless there is a significant decline in global energy prices.

Direct Commentary from ING

“The Czech National Bank’s upcoming decision will be the main regional event on Thursday. We expect no change in the 3.75% rate, with markets focused on policy guidance and any signals about the timing and pace of future rate moves. The week closes with Polish industrial production on Friday.”

“Friday’s US inflation data offered some relief after higher global energy prices and a hawkish ECB outcome triggered a sell-off in CEE rates. However, the market remains more hawkish than our economists’ forecasts, and this is unlikely to change without a meaningful decline in global energy prices.”

“The CNB should strike a dovish tone, helping to reduce rate hike expectations. We see further upside in EUR/CZK and expect the pair to approach Thursday’s meeting around 24.300, with scope to rise further if the CNB confirms its dovish stance and the US dollar strengthens.”