EUR/CZK unlikely to break below 26.00 – Danske Bank

Aila Mihr, Analyst at Danske Bank, expects the Czech Koruna to stay above 26.00 per Euro in the near term.

Key Quotes

“Despite the recent move lower, we think EUR/CZK will struggle to break robustly below 26.0 in the short term, as the CNB remains in wait-and-see mode and profit taking on speculative long CZK positions will set in at this level”.

“There is still a risk that a coordinated exit from the short EUR/CZK positions could lead to sharp spikes higher, even above 27, if expectations about a CNB hike in H2 17 are disappointed or external risks re-emerge”.

“Over the medium term, we still look for more gradual CZK strengthening based on robust economic fundamentals as well as relative monetary policy divergence as the CNB moves towards tighter monetary conditions, whereas we do not expect the first ECB hike before 2019”.

“Based on the latest movements, we lower our forecasts for EUR/CZK slightly, targeting the cross at 26.2 in 1M (26.5 previously), 26.1 in 3M (26.3), 26.0 in 6M and 25.5 in 12M”.