EUR/CZK likely to decline gradually to around 24.5 in one year’s time, says Commerzbank

Sine Tuesday afternoon, the EUR/CZK pair has declined sharply after the Czech National Bank board members spoke about the requirement to hike rates again. The vice governor in particular and board member Marek Mora cited the scope for additional tightening because of how solid Czech economic growth is at the moment, noted Commerzbank in a research report.

The latest comments signify that the next hike is expected to come at the meeting on 27 September, stated Commerzbank. The Czech economic growth has surprised significantly to the upside in recent months. After the second quarter data showed GDP rising by 2.3 percent quarter-on-quarter, the central bank’s own macroeconomic projections are already out of date.

The EUR/CZK pair is expected to decline gradually to about 24.50 in one year’s time, according to Commerzbank. If the Czech National Bank were to hike rates more regularly, the risk to the EUR/CZK forecast would be the downside.

“In the near-term, we do not expect a sustained decline of EUR-CZK simply because of the sizeable outstanding short positions, which would look to book profit and exit with each round of CZK appreciation”, added Commerzbank.

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