Czech Koruna: Dovish CNB may weaken CZK against Euro - ING

ING strategist Frantisek Taborsky highlights a hectic Central and Eastern Europe (CEE) data schedule, emphasizing the Czech National Bank (CNB) meeting as the crucial event. He anticipates rates to remain at 3.75% with a dovish outlook, in contrast to prevailing hawkish market expectations. ING forecasts a further rise in EUR/CZK, targeting the pair to reach 24.300 near the meeting and possibly climbing higher if the CNB's language and US Dollar (USD) strength align.

The Czech National Bank's upcoming decision will be the primary regional occurrence on Thursday, with expectations of no change in the 3.75% rate, as traders focus on policy cues and indications of future rate adjustments. The week concludes with Polish industrial production figures on Friday. Although Friday's US inflation data provided some relief after heightened global energy prices and a hawkish ECB contributed to a sell-off in CEE rates, the market remains more hawkish than ING economists' projections, and this is unlikely to alter without a significant decrease in global energy prices.

The CNB should adopt a dovish tone, potentially lowering expectations for further rate hikes. ING forecasts a further upward trend for EUR/CZK, anticipating the pair to approach Thursday's meeting around 24.300, with potential additional gains if the CNB verifies its dovish stance and the US dollar strengthens.