The USD to CZK exchange rate is currently experiencing downward pressure, hovering around 90-day lows near 20.58, which is 1.2% below its three-month average of 20.85. The dollar's weakness is primarily attributed to expectations of aggressive rate cuts by the Federal Reserve, as recent indicators, including a drop in inflation from 3% to 2.7% in November, have stoked these bets for easing monetary policy in 2026.
Analysts highlight the mixed US economic data, indicating slowing growth while the labor market remains resilient. This dichotomy supports a cautious stance from the Federal Reserve, which may limit the extent of USD depreciation in the near term. However, fading safe-haven demand for the dollar amid stabilizing equity markets and geopolitical tensions also plays a role in the dollar's decline.
In contrast, the Czech koruna is benefiting from a hawkish stance taken by the Czech National Bank (CNB), which has refrained from aggressive interest rate cuts. The CNB's projected inflation rate is expected to remain close to the 2% target, alongside stable GDP growth forecasts of 2.3% in 2025 and 2.4% in 2026, contributing to a supportive environment for the koruna. UBS has adjusted its EUR/CZK forecast to 24.3, indicating confidence in the CZK's strength amidst easing inflationary pressures.
The outlook indicates that unless there are significant changes in US economic data or geopolitical tensions, the USD may continue to drift lower against the CZK, while the koruna could remain stable because of the CNB's cautious monetary policy. Given these dynamics, monitoring upcoming CPI and PCE prints as well as Fed communications will be critical for understanding future movements in the USD to CZK exchange rate.
