Uncertainty ahead of today’s outcome of Fed meeting weighed on the Polish zloty and the Hungarian Forint. Both lost around 0.8% on fears of the approaching end of Fed´s QE policy. The Czech koruna, in contrast, remains resilient both to uncertainty ignited by the Fed and ongoing domestic political crisis.
Although the koruna can continue to ignore domestic politics as well as regional volatility, the room for further gains is rather limited. Lower than expected inflation should weaken implicitly targeted exchange rate in the next CNB inflation report. The latest available forecast sees EUR/CZK average at 25.70 in Q2 2013 and only very moderate strengthening to 25.50 in Q4 2013. Yesterday, central banker Lízal acknowledged that “it seems much more likely that there will be need to intervene, compared with what appeared at the beginning of the year”. And this morning, vice governor Tomšík argued that weaker exchange rate might be needed to stabilise inflation expectations. After merging all these news with results of technical analysis, it seems likely that EUR/CZK is ready to weaken in the soon and eventually re-test 26.00 EUR/CZK.