The Czech koruna lost ground yesterday. It opened near its three-year high at EUR/CZK 29.00, but it plunged over the day back to 29.30. Almost everyone was buying euros, hence the 29.00 level proved to be pretty strong support for EUR/CZK. Member of the CNB Board Michaela Erbenova supported the trend as she quoted that that she saw no reason for any rate hike in mid-term horizon. She continued the koruna should not break through 29.00 now, because flows onto and out of the economy were balanced now. She regards recent koruna strengthening as a fluctuation than some kind of a trend. Despite Erbenova’s words we keep our optimistic view on the koruna. The unit might break the 29.00 level after Polish election due to a firming zloty. Czech koruna plungs as it fails to break through 29.00 again.
Today, the calendar is empty, but the FOMC meeting might influence also CE currencies as high U.S. yields pushes sources outside of the region. Nevertheless, the EUR/CZK might bounce back, as it is close to the resistance level at 29.35-40.
(ČSOB - Investment research)