I've been playing around with ideas (not primarily to make money) about what exactly is going to happen when Czech National Bank will leave the EUR\CZK peg? It's been on for roughly 2.5 yrs as a contra-deflationary measure by depreciating the currency (from 25.5 CZK to 27 CZK for EUR). FT write about the current situation in a nutshell
Surely all participants have been calculating for months how to trade once the intervention stops. Pretty sure everyone will be speculating on appreciation (roughly levels suggested by Big Mac index or something like that - ideas for indicators?).
But CNB says(slide 29) it wont happen since the price level rose accordingly. Yet from market graph there is clear downwards pressure on the rate - so if the market thinks its gonna go down, would it?
Or what about going long on put options? But then getting European option, I assume the market would be volatile so cant get the exercise date correctly.
So basically I'm after if there is a historical parallel to this? CHF in Dec 2015 was totally unexpected so there was massive fuzz and I dont think anyone has CZK mortgages etc.
Do you reckon the market would move big time or not? CNB has history and reputation for being quite straightforward, but surely they wouldn't put in presentation that upheaval is expected as it would definitely result in one.