Czech Koruna: CZK faces downside risks against Euro into CNB – ING
ING analysts David Havrlant and Frantisek Taborsky say the Czech market is being driven mainly by global factors and high energy prices, but EUR/CZK still reacts to Czech National Bank (CNB) meetings and guidance.
Czech Koruna (CZK) faces potential downside risks against the Euro (EUR) as ING analysts David Havrlant and Frantisek Taborsky highlight the influence of global factors and high energy prices on the Czech market. The interest-rate differential is the key indicator for EUR/CZK, and any reduction in the expectation of further rate hikes could provide opportunities for the koruna to strengthen.
Despite a higher interest rate, the narrowing differential has weakened the koruna in September, and further losses are possible. A meeting of the Czech National Bank (CNB) is expected to focus on rates, but energy prices remain the primary driver. With the CNB having already increased rates in June, and no immediate plans to tighten further, expectations for hikes at the front end may decrease.
However, core yields and a projected fiscal deficit are expected to keep the curve under pressure. Overall, the flattening curve is anticipated to steepen in the long run.
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