Are negative interest rates next in CZK?

The CZK was the top performing currency in August, rising 2.2% vs the USD and 0.13% vs the EUR. The current account surplus (0.6% of GDP in 2014) offers stability during periods of market stress.

Q2 GDP rose to 4.4% yoy from 4.0%, the highest since Q1 08 and the strongest result in Europe. This further supports CZK appreciation pressure. A 30% chance of the CNB resorting to a negative deposit rate, said Societe Generale in a research note on Friday.

EUR-CZK to move lower has recently been strengthened by the year-to-date improvement in most economic indicators and the pickup in inflation in the Czech Republic. Q1 GDP growth surged to 4% yoy (vs. 1.3% yoy in Q4'14), while headline inflation climbed from 0.1% in Jan'15 to 0.8% in Jun' will abide by its commitment to an exit from the current regime in H2'16, while continuing to deploy discretionary FX interventions thereafter, adds Societe Generale.