EUR/CZK likely to appreciate gradually in quarters ahead, to hit 26 by end-2017

The EUR/CZK pair has appreciated just slightly since the CNB terminated the FX cap in April. This is because of the overbought status of the koruna. But the CNB’s hawkish comments and the upbeat GDP and foreign trade figures underpinned the currency pair that in turn appreciated to 26.20.

The exchange rate is expected to appreciate very gradually in the quarters ahead as the strengthening tendencies would be followed by some foreign investors, who would be selling korunas, noted Erste Group. A similar development is likely to continue in 2018.

“We expect the EURCZK to hit 26.0 at the end of 2017 and 25.5 at the end of 2018. The risk for the EURCZK is to be tilted to the depreciation side, in our view, due to the extent to which the koruna is overbought”, added Erste Group.