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Czech Koruna seen pressured as CNB guidance turns more dovish

ING expects CNB to keep rates at 3.75% and forecasts EUR/CZK around 24.20 to 24.25 as tightening expectations fade.

Reported · Written up by our desk · Major Pairs

ING strategist Frantisek Taborsky said July Czech inflation at 1.7% year on year should have limited impact on the Czech National Bank’s (CNB) meeting, with the bigger question being how dovish the central bank’s guidance may sound.

Taborsky expects CNB to hold its policy rate at 3.75%, while anticipating mixed forecast revisions and only scope for one more hike.

He pointed to July inflation details, noting the print rose from 1.5% to 1.7% year on year, with lower food prices partly offsetting higher fuel prices, and services inflation picking up to 4.7% year on year from 4.5% in June.

With July data viewed as not materially changing the inflation outlook, Taborsky said the meeting should lean dovish versus market pricing, which currently reflects more hikes than his view, leaving EUR/CZK trading around 24.20 to 24.25 and keeping the Czech koruna relatively weak, according to FXStreet.

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