On Tuesday, the Czech koruna posted further gains and the EUR/CZK pair was therefore seen at the lowest level since the end of April. As regards the koruna’s peers, the zloty closed the session barely changed whereas the forint gained about 0.5 percent.
The Hungarian central bank is expected to significantly ease monetary policy in the course of the coming months (the next meeting is scheduled for 28th August) and the forint might have been supported by foreign investors’ demand for high-yield Hungarian government bonds.
As regards the koruna, we believe that its recent gains were driven rather technically than by fundamentals. Despite the fact that room has been opened for short-term koruna’s appreciation to EUR/CZK 24.40, longer-term fundamentals do not play in favor of further strengthening. Apart from record-low official interest rates (which might be cut even further in months to come), a lower pace of growth of German economy should weaken the Czech currency in the future.