USD/CZK Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows with mixed signals from both economies.
Key drivers:
• Rate gap: The Federal Reserve's potential for rate cuts contrasts with the Czech National Bank's steady policy, which aims to combat inflation.
• Risk/commodities: Oil prices are trending lower, which may exert additional pressure on the US dollar as the economy benefits less from energy exports.
• One macro factor: The Czech economy is projected to grow steadily, bolstered by robust domestic demand, helping to support the koruna's performance.
Range: USD/CZK is expected to hold within its recent range, with limited movements as the market digests these factors.
What could change it:
• Upside risk: Surprising strength in US labor market data could support the USD and alter current trends.
• Downside risk: Escalating geopolitical tensions involving the US could weaken the dollar further, leading to more downward pressure.
