Czech Koruna Vulnerable to Rate Hike Expectations
ING analysts David Havrlant and Frantisek Taborsky say that global factors and high energy prices are driving the Czech market. However, they note that the EUR/CZK exchange rate still reacts to guidance from the Czech National Bank (CNB) and its meetings.
The interest-rate differential is seen as the best guide for EUR/CZK, and the analysts expect it to remain narrowed. This could lead to further koruna losses if rate-hike expectations are pared back.
The koruna has been pressured by rising rates and energy prices. The CNB raised rates in June, but the board has signaled no urgency to tighten again.
Market pricing of roughly 100bp of tightening has weakened the koruna in September. However, if a rate hike is not currently under consideration, the pair could move higher as hike expectations are pared back and oil and gas prices continue to rise.