Czech Koruna: 6-12 Month Outlook

In the past month, EUR/CZK has hit its lowest level of 27.006 since November 2013 and insisted the CNB to interven on the FX market. Any risk of a slump in euro area's data is likely to increase FX interventions. RBC Capital Markets assumes, Czech's robust fundamentals will push EUR/CZK to test the floor of 27.00, forcing CNB to make further interventions on the FX market. 

According to RBC-POLAR, the Czech koruna is 7% undervalued. CNB may seek to keep it undervalued. 1Q real GDP came in at 4.0% y/y. Market consensus raised real GDP forecast for 2015 to 3.10 from 2.90 in July, notes RBC Capital Markets. The unemployment rate continued to fall, reaching 6.2% in June. Additionally, the budget balance turned to a surplus in June and increased to bn in July.