EUR/CZK seen at 24.80 in 12-month – Danske Bank

Analyst at Danske Bank Aila Mihr believes the cross could slip back to the 24.80 region within a year’s view.

Key Quotes

“After a temporary spike back to 25.85 in a thin market, EUR/CZK has returned to trading around the 25.50 level, reassured by the CNB’s unaltered positive assessment of the growth outlook and commitment to the hiking cycle despite moderating inflation pressures”.

“We project the cross to continue hover around current levels in the short term in the absence of any immediate changes to the monetary policy outlook, but look for more gradual EUR/CZK depreciation over the medium term based on strong Czech macro fundamentals and relative monetary policy divergence”.

“But with the CNB on hold, and the ECB moving towards gradual policy normalisation, 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”.

“We leave our short-term EUR/CZK forecast unchanged at25.40in 1M and 3M, but ‘roll-over’ our 6M forecast to 25.00 (25.10 previously) and 12M to 24.80 (25.00 previously)”.