Economists at Credit Suisse continue to expect EUR/CZK to hover in the 25.50 area for now, as investors look set to retain split views on the magnitude of the possible policy rate hike at the 30 September central bank meeting. Beyond the very short-term, they set a medium-term target of 25.20 for EUR/CZK as the central bank is set to surprise markets on the hawkish side later this year.
A grind lower view in EUR/CZK
“In the short run, EUR/CZK looks set to continue to hover around the 25.50 mark. The Czech Republic’s sizable overshoot in inflation for July as well as the benign covid situation in the country implies that for now, investors are likely to retain spilt views on the size of a possible policy rate hike at the next central bank meeting on 30 September, with some expecting 25bps and others expecting 50bps.”
“We see a strong macro case for a decline in EUR/CZK to new post-pandemic lows, such as 25.20, later in the year. Our core view remains that the central bank is going to continue to surprise markets on the hawkish side.”
“The central bank’s latest EUR/CZK projections from August seem to give a “green light” to further declines in the pair. The central bank now expects EUR/CZK to average 25.12 in Q4 2021 (compared with 25.43 previously).”
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