2018.06.2703:06:00UTC+00Czech National Bank To Hike Today But Koruna Strength Will Be Limited: ING

Viraj Patel, foreign exchange strategist at ING, said the Czech National Bank is likely to hike today as the CZK is significantly weaker compared to the central bank's own forecast. That is against market consensus and in turn means that the needed tightening of monetary conditions is missing, he said.

"We envisage modest CZK strength in response to a CNB hike, yet the currency's upside may be partly mitigated by the challenging environment for EM FX - with the entire CEE space under pressure - while a hike is already being priced in by markets with a 60% probability," Patel said in a note.

"EUR/CZK unlikely to break sustainably below the 25.70 level today."

The bank is set to announce the interest rate decision at 7 am ET on Wednesday. The CNB is widely expected to hold the benchmark repurchase rate at 0.75 percent.