The Czech koruna started at 28.32 EUR/CZK on Friday. The positive mood on the regional market supported the currency and it closed stronger at 28.28. The financial market waited for the CNB’s minutes published on Friday in order to get actual central bankers view. The minutes were more dovish than expected. The CNB governor even said that the next move can be in either direction.
The CNB has no bias and so nothing is impossible. We don’t consider a rate cut as a real possibility at present and the actual minutes show evidence of unwillingness of the board to talk about rate hike. Therefore a stability, postponement of rate hike and widening of interest rate differential against euro rates is the most probable scenario. And the CNB relies on the weakening of the Czech koruna in coming months due to the widening of interest rate differential. Today the Czech koruna starts near its maximum reached on Monday. We expect the currency will stay within the narrow range 28.20-28.30 EUR/CZK.
(CSOB - Investment research)