The Czech market closely watched all the information coming from the central bank on Thursday. The Czech koruna started at 28.36 EUR/CZK and since the morning it weakened to the 28.45 level. As expected the Czech National Bank didn't change its two weeks repo-rate. The Governor of the CNB talked about the rate stability for the nearest term, somewhere between one to four months. Later the gradual interest rate rise is probable. The inflation risks are balanced and therefore the central bank can sit and wait and closely watch the ECB policy stance and the economic figures.
The koruna will limit any central bank action even the central bank expect slower appreciation than the marked. In the meantime it’s nearly sure that the CNB will not keep pace with the ECB. Therefore we think one rate hike in Q3 is probable depending on the inflation and koruna’s rate. Today, the koruna will remain in narrow band and eyes the core market movements.
(CSOB - Investment research)