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21 Apr 2015
EUR/CZK could test the 27.00 floor next year – Danske Bank
FXStreet (Edinburgh) - Lars Christensen, Chief Analyst at Danske Bank, argued that the cross could visit the 27.00 area in 2016.
Key Quotes
“Czech GDP grew 2.0% in 2014, up from -0.7% in both 2013 and 2012 (but lower than our forecast of 2.6% y/y). Indicators for the macro economy in 2015 have generally been to the positive side with lower unemployment and increasing retail sales. This supports our current GDP forecast at 2.7% y/y for 2015 and 3.1% y/y in 2016”.
“The Czech central bank (CNB) has been trying to curb deflationary pressures by keeping a floor under EUR/CZK at 27. Furthermore, at the recent recent monetary policy meeting in late March, the CNB stated that it remains ready to move the floor up if there were to be a long-term increase in deflation pressures”.
“From a longer-term perspective, the Czech koruna is somewhat undervalued, in our view. However, this is under an assumption of continued sub-target inflation. To hit the 2% inflation target, the CNB will have to keep the koruna undervalued”.
“Given the undervaluation of the CZK and the continued appreciation pressure of the other CEE currencies, we are likely to see EUR/CZK move close to the 27 floor in the coming year”.
Key Quotes
“Czech GDP grew 2.0% in 2014, up from -0.7% in both 2013 and 2012 (but lower than our forecast of 2.6% y/y). Indicators for the macro economy in 2015 have generally been to the positive side with lower unemployment and increasing retail sales. This supports our current GDP forecast at 2.7% y/y for 2015 and 3.1% y/y in 2016”.
“The Czech central bank (CNB) has been trying to curb deflationary pressures by keeping a floor under EUR/CZK at 27. Furthermore, at the recent recent monetary policy meeting in late March, the CNB stated that it remains ready to move the floor up if there were to be a long-term increase in deflation pressures”.
“From a longer-term perspective, the Czech koruna is somewhat undervalued, in our view. However, this is under an assumption of continued sub-target inflation. To hit the 2% inflation target, the CNB will have to keep the koruna undervalued”.
“Given the undervaluation of the CZK and the continued appreciation pressure of the other CEE currencies, we are likely to see EUR/CZK move close to the 27 floor in the coming year”.