EUR/CZK seen at 25.40 in the near term – Danske Bank

Analyst at Danske Bank Aila Mihr noted the Czech Koruna should keep the 25.40 region in the short-term horizon.

Key Quotes

“EUR/CZK has traded relatively stable around the 25.40 level over the last month and we project the cross to continue trade around these levels in the near term, in light of the absence of imminent catalysts that could change the monetary policy outlook as the CNB enters wait-and-see mode”.

“We expect CZK to continue with its gradual appreciation path over the medium term based on robust Czech economic fundamentals and relative monetary policy divergence”.

“But with the CNB on hold, and the ECB moving towards normalisation by year end, there will be less support from the latter factor going forward, which is also why we expect a more gradual EUR/CZK depreciation pace compared to the CNB forecasts”.

“But given the possibility of another CNB hike in H2 18, we stress that the risk to our long-term forecasts lies to the downside. Overall, we keep our forecasts for EUR/CZK unchanged at 25.40 in 1M, 25.40 in 3M, 25.10 in 6M and 25.00 in 12M”.