KBC Market Research Desk
KBC Bank
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Regional currencies weaker across the board
The CNB to keep targeting the koruna until 2016
Regional currencies have been weaker across the board recently, though triggers for depreciations have been different. While the forint and the zloty does not like the recent global equity sell-off and specifically the Polish currency could be even more nervous because of poor July’s PMI figures (drop below the 50 level), the Czech koruna was hit by an outcome of yesterday’s CNB Bank Board Meeting.
Recall that the Bank Board had a new forecast at hand yesterday. Interestingly, the details of the forecast were not at all awaited as eagerly as the decision on the exchange rate of the koruna. While the speculations that the lower threshold for the EUR/CZK might be moved up (from the 27.0 level) proved to be false, the Board surprised in the other way. The Bank Board decided to continue using the exchange rate as a monetary policy instrument at least until 2016. The Bank Board would have to find a further noticeable increase in anti-inflationary factors before moving the exchange rate commitment to a weaker level. In this respect it is worth noting that previous forecast envisaged the nearest possible departure in the first quarter of 2015, with the second quarter cited after the previous meeting, now the forecast cites the third quarter of 2015 as the horizon.
To sum up: bullish days of the Czech koruna have been counted for some time or at least until 2016.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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