ING strategist Frantisek Taborsky highlights the upcoming Czech National Bank (CNB) meeting as the primary event for Central and Eastern Europe this week, with expectations that the CNB will maintain its policy rate at 3.75% and deliver dovish guidance [1]. Despite recent relief from US inflation data, the market remains more hawkish than ING economists' forecasts, largely due to higher global energy prices and a hawkish European Central Bank (ECB) outcome, which previously triggered a sell-off in CEE rates [1].
ING anticipates that the CNB's dovish tone will help reduce rate hike expectations, contrasting with the still-hawkish market pricing [1]. The firm expects further upside in the EUR/CZK currency pair, projecting it to approach 24.300 around the time of the CNB meeting, with potential for additional gains if the CNB confirms its dovish stance and the US dollar strengthens [1].
Markets are closely watching for signals regarding the timing and pace of future rate moves from the CNB, as these will be key to shaping investor sentiment and currency movements [1]. The week will also see Polish industrial production data released on Friday, though the CNB meeting remains the focal point for regional market participants [1].
CONCLUSION
ING expects the Czech National Bank to maintain rates at 3.75% and deliver dovish guidance, which could weaken the Czech koruna against the euro. Market participants are likely to adjust rate hike expectations downward if the CNB confirms its dovish stance, with EUR/CZK projected to rise further. The CNB meeting is set to be the main driver for regional currency and rate movements this week.