EUR/CZK Outlook:
The EUR/CZK is likely to move sideways as it is near its recent average and has traded stably in a narrow range. Both the Euro and Czech Koruna are facing balancing economic pressures that will keep the exchange rate relatively stable.
Key drivers:
• Rate gap: The European Central Bank (ECB) is maintaining steady interest rates, while the Czech National Bank (CNB) continues a restrictive monetary policy to manage inflation, creating different influences on the currencies.
• Risk/commodities: Oil prices are currently at lows but remain significantly above their recent average, which could affect the Eurozone's inflation outlook and, indirectly, its currency's strength.
• One macro factor: Rising inflation in the Czech Republic, particularly in food and housing sectors, pressures the CNB and could impact the Koruna's performance.
Range:
Expect the EUR/CZK to hold within its recent range, showing little movement outside its stable 1.2% bandwidth.
What could change it:
• Upside risk: A sharper-than-expected decrease in inflation in the Eurozone could bolster the Euro.
• Downside risk: Continued strong inflationary pressures in the Czech economy may compel the CNB to adopt a more aggressive monetary stance.
