ING strategist Frantisek Taborsky assesses EUR/CZK after the Czech National Bank’s dovish-leaning 4–3 split decision. He notes that rate differentials would point to a weaker koruna, but sees the recent rally in CZK rates as excessive. With expected correction in rates and seasonal support, ING keeps a relatively tight EUR/CZK range, only slightly adjusted from pre-meeting levels.

Koruna outlook and rate differentials

“The main takeaway from the CNB meeting is the 4–3 split within the board, following a long period of strong majorities. The market interprets this as a dovish signal, suggesting the CNB is unwilling to hike rates further unless the inflation situation deteriorates significantly. For the first time since the onset of the US-Iran conflict, the CNB’s forecast aligns closely with market pricing, with the PRIBOR rate peaking at around 4.55%.”

“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.”

“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 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.”

“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.”