CAD/CZK Outlook:
The CAD/CZK exchange rate is likely to increase as it is trading above its recent average and near recent highs, driven primarily by strong oil prices.
Key drivers:
• Rate gap: The Bank of Canada is relatively more hawkish compared to the Czech National Bank, which is holding interest rates steady.
• Risk/commodities: Oil prices are at 90-day highs, significantly boosting the value of the CAD as Canada is a major oil exporter.
• One macro factor: The Czech Republic's inflation is easing, with a recent Consumer Price Index at 1.6%, which may limit the CZK's strength.
Range:
Expect the CAD/CZK to test the higher end of its recent range, possibly moving towards 15.35.
What could change it:
• Upside risk: A further escalation in global oil prices due to geopolitical tensions could bolster CAD.
• Downside risk: A weak report from Canada's services sector could overshadow oil gains and affect CAD negatively.