The Czech koruna is expected to start appreciating, according to an Erste Group Research report. The development of the currency is still being negatively impacted by external factors and its current level does not correspond to the fabourable development of the Czech economy and the rising interest rate differential towards the euro area.
As the Brexit negotiations and the EU-US trade talks continue to take place, the Czech koruna continues to be soft. This can be seen in a comparison with some other CEE currencies, as they have similar movements as the koruna despite different monetary policy.
“We expect the koruna to start appreciating again from 2H19; however, the risk is still higher than usual and tilted towards a weaker koruna”, said Erste Group Research.
Even if the external environment rebounds and the likelihood of some considerable negative shock to the world economy is lowered, the appreciation rate might be relatively low.
“However, in the event of hard Brexit, we would expect the temporary depreciation of the koruna to well above EURCZK 26, with a later gradual correction to current levels”, added Erste Group Research.
