EUR/CZK: Czech koruna to do well as CNB is set to hike rates – ING

The Czech central bank (CNB) will likely raise rates in the fourth quarter and economists at ING expect CZK to strengthen and HUF to come under pressure.

Favour CZK; HUF not so much

“The Czech currency, CZK, remains our top pick to do well as the CNB is getting closer to the fundamentally justified rate hikes. Although this should be a story for the fourth quarter, the CNB should start considering tightening more vocally in the autumn and this should, in turn, spill over into stronger CZK. We see EUR/CZK at 25.50 in the second half of this year.” 

“Like PLN, the Czech koruna should also benefit from the current account surplus this year (around 2% of GDP), but the zloty is to lag behind due to the dovish central bank. In Poland, we expect the Swiss franc mortgage story to have a limited impact on PLN as the CHF/PLN conversion is likely to be done off-market via Poland's central bank, the NBP.”

“We continue to see HUF as the least attractive currency in the region and expect it to come under pressure (to EUR/HUF 370) this quarter as the real rate will fall.”

“We like Romania's leu from a carry perspective (the highest carry in the region) and our view that the usual annual adjustment in EUR/RON higher is now behind us. We expect EUR/RON to stay within the 4.92-93 range in the coming months.”