ING maintains a stable EUR/CZK outlook between 24.35 and 24.40, arguing that seasonal support and an expected correction in excessive koruna rates will offset the dovish sentiment from the latest CNB board split.
The CNB's dovish-leaning 4-3 split decision and a PRIBOR peak forecast of around 4.55% put renewed upward pressure on EUR/CZK, with rate differentials pointing toward 24.450. However, ING sees the recent CZK rate rally as excessive, expects a hawkish repricing, and cites strong November-December seasonal koruna support, keeping its range at 24.350-24.400, little changed from before the meeting.
The Czech National Bank's board split 4-3, which the market read as dovish and a sign the bank is unwilling to hike further unless inflation deteriorates significantly, putting upward pressure on EUR/CZK.
ING expects a relatively tight range of 24.350-24.400, little changed from its pre-meeting view, since rate-differential pressure toward 24.450 should be tempered by a correction in CZK rates and seasonal koruna support.
The dovish-leaning 4-3 CNB split suggests no further hikes unless inflation worsens significantly, and CZK rates rallied excessively; rate differentials at face value point to a weaker koruna around 24.450. Strong November-December seasonal support should temper the weakening pressure, limiting the downside rather than reversing it.
Yes, it created renewed weakening pressure on the koruna, but ING argues the rate move was excessive and seasonal support in November-December should temper further weakening, keeping the koruna in a tight range against the euro.
ING strategist Frantisek Taborsky expects the EUR/CZK pair to remain within a tight 24.35-24.40 range following the Czech National Bank's 4-3 split decision. While the market interpreted the vote as a dovish signal, ING views the recent rally in koruna rates as excessive and anticipates a hawkish repricing. Strong seasonal support for the koruna in November and December is expected to temper upward pressure on the pair despite unfavorable rate differentials.
The Czech National Bank's board split 4-3, which the market read as a dovish signal that the bank is unwilling to hike further unless inflation deteriorates significantly, putting upward pressure on EUR/CZK.
ING expects a relatively tight range of 24.350-24.400, little changed from its pre-meeting view, since rate-differential pressure toward 24.450 should be tempered by a correction in CZK rates and seasonal koruna support.