CNB most probably intervened yesterday

Rising straight to 27.10, EUR-CZK jumped sharply during the European session yesterday, the price action strongly hints at intervention by CNB. 

The CB has acknowledged intervening in the FX market to weaken the koruna, but no longer gives out details of timing and volume, official data on transactions will eventually show up intervention, but latest data are still for May 2015. 

The development is particularly interesting ahead of next week's board meeting, if the bank has clear need to vigorously defend the floor leading up to the meeting, it may be expected to spell out a thorough response and guidance in its statement next week. 

"The CB is contemplating extending its floor mechanism to ward off speculation about exit, or the growth and inflation are recovering in a self-sustaining manner already and that the need for the floor has reduced", says Commerzbank. 

In second scenario, an increased speculative challenge can be expected and CZK volatility in the weeks ahead, which could eventually force a change of strategy by CNB. As base-case, CNB will defend the floor for now, but not introduce fresh QE measures. 

"EUR-CZK likely to hover around 27.00 in the months ahead", added Commerzbank.