We remain bullish CZK, with the CNB more confident it will exit from the koruna cap in mid-2017 at its latest meeting.

This week, the CNB kept the benchmark rate unchanged at 0.05% and attempted to tame market speculation of a break in the EURCZK floor by shifting its hard commitment by one-quarter to 2Q17.

However, we believe this is unlikely to be effective. Theoretically, Q1’17 was a “live” date to exit the EURCZK floor but was unlikely in practice.

The market is now likely to completely price out a floor exit in January to March following the CNB’s comments, but the central bank’s indication that they see an exit from the floor likely in mid-2017 increases our confidence on the exit for the rest of next year.

We note that Governor Rusnok did not provide an exact month for when the floor could be exited in the Q&A session following the CNB decision, arguing that such a discussion is pointless at this stage since the CNB has not decided the exact quarter to exit the floor.

This confirms that Q2’17 is on the table, in our view. He has previously speculated in local comments that the summer is not practical (suggesting September). While on the other hand, the announcement of the British Prime Minister Theresa May to invoke the British exit request in line with article 50 by March 2017 at the latest, thus starting official exit negotiations put considerable pressure on both euro and sterling yesterday. The article 50 implication are likely to weigh on next ECB and BoE monetary policy changes which in turn would have effects on the cross currencies,

Thus, we recommend adding EURCZK shorts when EURCZK 12m forwards approach 26.85.