USD/CZK Outlook: Bearish, as the rate is below its recent average and near recent lows due to ongoing concerns over U.S. monetary policy.
Key drivers:
• Rate gap: The Federal Reserve is expected to ease interest rates while the Czech National Bank maintains its rate, supporting the koruna against the dollar.
• Risk/commodities: Current volatility in the US dollar further pressures it, linked to geopolitical tensions and uncertainties around U.S. tariff policies.
• One macro factor: Stable inflation forecasts and expected economic growth in the Czech Republic bolster the koruna's position.
Range: USD/CZK is likely to drift within its recent trading range as market participants respond to macroeconomic factors.
What could change it:
• Upside risk: A stronger-than-expected U.S. labor market report might boost demand for the dollar.
• Downside risk: Continued fears regarding U.S. government shutdowns could further weaken the dollar.