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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.
CZECHIA
- The deterioration in the macro outlook combined with the surging geopolitical uncertainty have been supporting the US Dollar in recent months while risky assets have remained under pressure.
- DXY index reached a new local high of 109.29 last week before consolidating lower in recent days with technical indicators showing that the dollar was starting to become significantly 'overbought' at the end of last week.
- The dollar consolidation has led to a sharp retracement on USDCZK, with the pair currently trading slightly below the 24 level.
- Interestingly, the 10Y real rate differential between US and Czech Republic, which has been a strong driver of the USDCZK exchange rate in the past 12 months, is indicating that CZK still remains ‘undervalued’ against the USD.
- Even though there are many other important currency drivers over time (real growth differential, political risk premium…), analysts have historically attributed a strong weight to the real rate differentials.
- Hence, is the USDCZK 'bear' retracement purely technical, and should we expect the pair to reach new highs as the economic situation continues to deteriorate?
Source: Bloomberg/MNI
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.
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