EUR/CZK seen at 25.5 in 12-month – Danske Bank

According to Analyst at Danske Bank Aile Mihr, the Czech Koruna is expected to appreciate towards the mid-25.00s within a year’s view.

Key Quotes

“EUR/CZK has now returned to a ‘managed float’, implying that henceforth both the level of interest rates and FX interventions could be used as policy instruments by the CNB to fulfil the inflation target”.

“Volatility in the cross could still be high in the short-term, before a gradual CZK appreciation trend starts. Medium-term CZK strengthening is supported by robust economic fundamentals, a current account surplus, REER undervaluation as well as relative monetary policy divergence as the ECB continues its easing measures whereas we expect monetary conditions in the Czech Republic to move in a more hawkish direction”.

“We project the cross to settle in a 25.5-26.0 range on a 3-12M horizon. In response to the floor exit we have adjusted our forecasts and target EUR/CZK at 26.5 in 1M (27.0 previously), 26.0 in 3M (27.0) and 6M, and 25.5in 12M”.