Key Moments
- UBS adjusted its EUR/CZK forecast to 24.3 across its horizon through the fourth quarter of 2026 after the koruna gained about 3.7% against the euro this year.
- The bank continues to project a positive total return for the Czech koruna, supported by a hawkish Czech National Bank, carry benefits, and relatively stronger Czech economic growth versus the Eurozone.
- UBS highlighted both downside and upside risks for the koruna, ranging from rate expectations and global trade tensions to developments in Germany and the conflict in Ukraine.
Forecast Revision and Rationale
Investing.com – UBS has adjusted its expectations for the Czech koruna following a rally in which the currency strengthened by approximately 3.7% against the euro this year. The firm cited indications that inflationary pressures in the Czech Republic are easing as a key factor behind the revision.
The global financial services group now projects an exchange rate of 24.3 for EUR/CZK across its entire forecast horizon through the fourth quarter of 2026. This represents a modest shift from its prior targets of 24.1, 24.0, 24.0, and 24.0, respectively.
| Period | Previous EUR/CZK Target | New EUR/CZK Target |
|---|---|---|
| Full forecast horizon through Q4 2026 | 24.1, 24.0, 24.0, 24.0 | 24.3 (across entire horizon) |
Even with the more conservative path, UBS still expects the koruna to deliver a positive total return over the forecast window.
Supportive Drivers for the Koruna
UBS pointed to several elements that continue to underpin the Czech currency. Among them are the Czech National Bank’s hawkish policy stance, the koruna’s carry advantage, and comparatively stronger economic performance in the Czech Republic relative to the Eurozone.
These factors, according to the bank, remain important pillars for the currency despite the recent moderation in its appreciation trend.
Headwinds and Downside Risks
At the same time, UBS emphasized that the koruna faces a number of challenges. The bank highlighted decelerating momentum in Czech manufacturing, the lagged impact of the recent currency rally on the inflation outlook, and the koruna’s relatively high valuation as sources of pressure.
UBS also outlined several potential downside risks that could weigh on the koruna:
- A dovish repricing of Czech interest rate expectations
- Renewed strength in the U.S. dollar
- A resurgence of trade tensions between the U.S. and the EU
- An escalation of the conflict in Ukraine
- An unwinding of existing positioning in the currency
Potential Upside Scenarios
The bank noted that there are also scenarios that could favor further koruna appreciation. Upside risks cited by UBS include:
- Stronger-than-expected economic growth in Germany
- An improving outlook for Czech manufacturing
- A reacceleration of inflationary pressures in the Czech Republic
- A ceasefire in Ukraine
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