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Free AccessMNI Analysis: Czech Nat Bank Holds Rates, Tweaks Forecasts
By Darren Walker
LONDON (MNI) - The Czech Koruna was higher against the euro Thursday,
boosted by the hawkish tone of the Czech National Bank (CNB) latest policy
statement, with hopes of further modest gains in coming weeks if key technical
resistance is breached.
The central bank left its main interest rate unchanged on Thursday, the
Monetary Policy Committee voted 6-1 to hold the rate at 0.75%.
--ULTRA LOOSE POLICY UNSUCCESSFUL
A central bank dependant on the exchange rate to tighten monetary
conditions, has been unsuccessful. The CNB has lifted its main two-week repo
rate in three steps since Aug 17 after more than 4 years of ultra loose policy
of rates near zero, together with intervention against the CZK currency.
--HAWKISH CENTRAL BANK
Central bank Governor Jiri Rusnok, in the press conference that followed
the policy statement, said he forecasts one rate hike in late 2018, adding the
bank cannot rule out an earlier rate increase should the situation markedly
deviate from the existing assumptions. The CNB sees the average 2018 Koruna rate
at 25/EUR vs previous 24.9. New forecasts assume broad stability of market rates
initially, followed by further growth in rates from late 2018/early 2019.
--LOOK TO ECB
Interest rate differentials (IRD) with the ECB continue to play a major
part especially since the ECB do not plan to exit its ultra-loose monetary
policy until later this year. The CNB will have limited room to raise rates
should the differentials remain wide, further pressuring the CZK.
--CZK BUOYED
The Kurona extended gains against the EUR on react with a sharp move from
25.588 to 25.468. The 100-dma provides key support at 25.430.
CZK buoyed by the hawkish tone of the central bank will be eager to end its
run of four consecutive quarters of losses, Q2 is currently showing gains of
0.69%.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
--MNI London Bureau; tel: +44 203-586-2232; email: darren.walker@marketnews.com
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.