EUR/CZK likely to fall to 25.00 by H1 2018, says Commerzbank

The EUR/CZK currency pair is expected to fall to 25.00 by the first half of next year, according to a recent report by Commerzbank. The post-election scenario in the Czech Republic is playing out more or less as was anticipated: there is complete uncertainty regarding the structure of government which will be formed in the coming month; yet, this is having little impact on the exchange rate.

The koruna appreciated sharply around the elections even though it was already clear that political uncertainty would result - and the currency has strongly outperformed even since then. In terms of the outlook itself, ANO leader Andrej Babis has announced that he may consider putting together a minority cabinet comprising ANO deputies and also assorted deputies from other parties based on commonality of vision.

He reckons that such a cabinet may help fulfill parts of the election promises of various political parties while being the only solution if most parties continue to reject entering a formal agreement with Babis. Babis, however, notes that it may prove difficult to put together such a cabinet because several major parties performed poorly in the elections (CSSD, KDU-CSL und KSCM) and are right now in flux, searching for new leaders and identity.

President Milos Zeman states that he will offer Babis two opportunities to form a government. If he fails, then the speaker would get the third turn. If even he fails, then early elections are a possibility. In short, Babis has the full support of the president to form a government and still, it is completely unclear whether a coalition government will be formed, a minority government will be formed, or neither.

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