USD/CZK Outlook:
The USD/CZK rate is currently at 90-day highs, trading significantly above its recent average. The rise is primarily driven by safe-haven demand due to increased geopolitical tensions.
Key drivers:
• Rate gap: The Czech National Bank has kept its rates steady, while the US Federal Reserve's moves are influenced by external risks.
• Risk/commodities: Rising oil prices have increased global demand for USD, as oil transactions are dollar-denominated.
• One macro factor: Slowing inflation in the Czech Republic indicates less pressure on the Koruna, allowing the USD to strengthen further.
Range:
Expect the USD/CZK to hold around current levels while potentially testing recent highs.
What could change it:
• Upside risk: Further escalation in geopolitical tensions could boost safe-haven flows into the USD.
• Downside risk: Improvement in economic data or sentiment in the Euro area may support the Koruna against the USD.
