The market anticipated that the central bank would stay on hold and would sound hawkish. The market therefore opened at EUR/CZK 28.70 and quickly climbed to 28.65. The koruna advanced further to 28.60 after the announcement that the central bank stayed on hold. Czech currency lost some gains in the afternoon, because the region started to weaken. Furthermore, governor Tuma was pretty neutral and fail to hint rise in rates in foreseeable future. However, the market bounce back deep into positive territory in the end after rating agency Moody’s improved outlook on the Czech republic rating to positive from neutral. Therefore the koruna closed at 28.57. Rapid rise of the euro against the dollar weighted too.
Today the domestic calendar is empty, thus the market may digest yesterday’s events. Weak U.S. dollar, rating outlook upgrade, and outlook for stable Czech interest rates point to a stronger koruna. Therefore we see the koruna to climb further. EUR/CZK lower after Moody’s decision to improve the country’s rating outlook.
(CSOB - Investment research)