EUR/CZK: Talk about a floor has already created it – Credit Suisse

The possibility that the central bank is considering a floor for EUR/CZK (presumably above current levels) is already providing a sort of floor for the pair, according to Credit Suisse.

Key quotes

“We would expect EUR/CZK to stay above 27.25 – which is roughly the mid-point of the range that it has moved within since the middle of March. A decline to the lower end of this range (i.e. to 26.75-27.00) would require a strong recovery in the Czech economy which would lead markets to price out the possibility of unconventional central bank measures.”

“When the central bank introduced a EUR/CZK floor in November 2013 it initially set the floor 4.7% above the spot level which prevailed at that time. By taking this figure as a naïve reference for how far EUR/CZK could rise in case a floor is introduced in a similar way now, we find that this would take EUR/CZK to the 28.70 area.”