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Czech koruna seen trading sideways versus euro as CNB holds rates

Commerzbank expects EUR/CZK to hover around 24.20 over the coming month, while noting Iran-related risks could still raise the odds of additional Czech tightening.

Reported · Written up by our desk · Major Pairs

Commerzbank expects the Czech National Bank to keep its policy rate unchanged at 3.75%, arguing that the June move was meant as fine-tuning rather than the start of a new tightening cycle. FXStreet reports the bank also flags the need for the CNB to avoid sounding dovish while it waits for clearer signals on inflation and growth.

FXStreet says the outlook is supported by inflation data that remain within the CNB’s target range, with July headline CPI rising to 1.7% year on year from 1.5%, matching expectations. The report also points to fuel prices as the main driver, rising an estimated 3.6% month on month.

On the currency path, Commerzbank projects EUR/CZK to move sideways around 24.20 over the next month. FXStreet adds that while Czech policymakers can afford to wait based on current conditions, risks tied to Iran could push pro-inflationary pressures higher and make further rate hikes more likely.

Commerzbank notes that lending growth remains robust and that wage and house price trends are still central to the CNB’s focus, according to FXStreet. The firm also highlights that Governor Ales Michl has continued to sound hawkish on domestic inflation risks, even as other board members argue only one more hike by year-end may be sufficient.

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