Key Moments
- ING maintains a relatively tight EUR/CZK trading range, with only a slight adjustment from pre-meeting projections.
- Rate differentials currently favor a weaker koruna, but ING views the recent rally in CZK rates as overdone.
- Seasonal support in November and December is expected to help limit koruna weakness after the Czech National Bank’s dovish-leaning decision.
CNB Split Vote Shapes Market Perception
ING strategist Frantisek Taborsky evaluates the outlook for EUR/CZK in the wake of the Czech National Bank’s latest decision, which resulted in a 4-3 split on the board and is being interpreted as leaning dovish. He highlights that this narrow vote follows a prolonged phase of strong majorities and is seen by markets as a sign that the central bank is reluctant to raise interest rates further unless inflation deteriorates markedly.
According to Taborsky, the CNB’s latest forecast is now closely aligned with market expectations for the first time since the onset of the US-Iran conflict, with the PRIBOR rate projected to peak near 4.55%.
Inflation Path and CZK Rates Assessment
“However, inflation is expected to worsen over the remainder of the year, approaching 3% and nearing 4% in the first quarter of 2027, bringing the new CNB outlook closer to our own forecast. We do not believe the current shift in energy prices justifies such a rally in CZK rates. The move appears excessive at this juncture.”
On that basis, Taborsky argues that current pricing in Czech rates has moved too far. He indicates that, in his view, at least two further interest rate hikes are likely to be the minimum that markets are prepared to accept.
“Consequently, we view two additional rate hikes as the minimum the market will tolerate, and, given today’s rebound, we anticipate a hawkish repricing.”
EUR/CZK Levels and Rate Differential Signals
“EUR/CZK is facing renewed upward pressure. Indeed, if we take the shift in rate differentials at face value, the rates point toward 24.450. However, as previously noted, rates are likely to correct, as the current rate differential is too tight.”
Taborsky notes that rate spreads currently imply a move higher in EUR/CZK, but he expects those spreads to ease as the rally in CZK rates unwinds. This anticipated normalization in rate differentials underpins ING’s relatively contained view on the currency pair.
Seasonality and Revised Trading Range
“Furthermore, the koruna benefits from strong seasonal support in November and December, which should help temper the current weakening pressure following the dovish CNB meeting. We therefore anticipate a new range of 24.350–24.400, little changed from our pre-meeting expectations.”
ING thus keeps its EUR/CZK forecast within a narrow band, reflecting an expectation that seasonal factors and a likely adjustment in rate expectations will counterbalance the near-term upward pressure on the currency pair.
EUR/CZK Outlook Summary
| Factor | ING View / Level |
|---|---|
| CNB board vote | 4-3 split, interpreted as dovish-leaning |
| Peak PRIBOR (forecast) | Around 4.55% |
| Implied EUR/CZK from rate differentials | 24.450 |
| ING anticipated EUR/CZK range | 24.350–24.400 |
| Inflation outlook | Approaching 3% later in the year, nearing 4% in Q1 2027 |
| Expected CNB rate hikes | Two additional hikes seen as minimum market will accept |
| Seasonal factors | Supportive for CZK in November and December |
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