EUR/CZK: Sideways despite hawkish CNB risk – Commerzbank

Commerzbank’s Tatha Ghose expects the Czech National Bank (CNB) to keep rates at 3.50% but sees upside inflation risks from higher energy prices and a growing chance of at least one 25 bp hike later in 2026. However, global risk aversion is offsetting support from rising rate expectations for Czech Koruna (CZK), leading to a sideways EUR/CZK view in coming months.

Energy shock and limited koruna upside

"In fact, the war has shifted the risk balance. The resulting surge in energy prices, with domestic fuel costs rising sharply and wholesale natural gas prices up significantly, introduces clear upside risks to the inflation outlook."

"While the board's immediate focus remains on second-round effects, which are not yet visible, the prospect of future rate hikes is steadily increasing. Our base-case is now for at least one 25bp rate hike later in 2026, unless of course, the war situation were to be resolved soon and the oil price were to decline clearly within months."

"Despite the hawkish outlook, the Czech koruna has failed to make new gains. The currency is being held back by broader global risk aversion, which is counteracting the support from rising rate expectations, and has even put a lid on the euro itself."

"Consequently, we expect the EUR/CZK pair to trade sideways in the coming months as opposing forces balance each other out."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)