Peak seen around 25.20 – ING

The Czech National Bank (CNB) will hold its first monetary policy meeting of the year today. The Czech Koruna has weakened above 24.90 EUR/CZK, which is basically the weakest level since early 2022. Economists at ING analyze how CNB’s decision could impact the pair.

CZK should start appreciating again later this year

If the CNB delivers a 50 bps rate cut, it is obviously negative news for the CZK. But on the other hand, we believe that the market positioning is already heavily short and rates are already pricing in the vast majority of CNB rate cuts. That is why we see the peak around 25.20 EUR/CZK. 

A minor cut, however, could bring a temporary strengthening towards 24.70 given heavy dovish expectations. 

In the long-term, however, we think that after the 50 bps rate cut and January inflation, the market should have hit the limit of what can be priced in and the CZK should start appreciating again later this year thanks to the economic recovery, good current account results and falling EUR rates improving the interest rate differential.