EUR/CZK and the 27.00 Floor


What’s interesting about EUR/CZK in light of the recent break of the EUR/CHF 1.2000 Floor is EUR/CZK since November 2013 has its own floor at 27.0 and set by the Czech central bank, the CNB. The object is to employ the exchange rate as the monetary policy tool to meet the 2% Inflation target, a target set since 2010. The 27.00 Floor will be maintained by the CNB by means to buy and sell Koruna’s or Euros.

The current 1 year Inflation CNB forecast is 1.5% and 2% in 3 years. Current Inflation reported November 2014 rose by 0.6% to 0.572 but fell to 0.08% in December. Current GDP is forecast to 2.3% and down from 2.4% due to weaker exports to Germany. The CNB’s Base Rate, the 2 Week Repo Rate was 0.05% in November 2012 and remains at 0.05% at last report.

EUR/CZK is forecast until January 2015 to 27.60 then a possible drop to 27.34 during 2015. EUR/CZK was Fixed at 27.79 last Friday by the ECB. My forecast reveals short term, EUR/CZK must clear 27.81 to move higher then next 28.14, 28.63 and 29.16. The lower end range reveals 27.05 must break lower to target 26.57. But the goal of the CNB is to maintain EUR/CZK at around the middle to upper 27.00’s. At EUR/CZK 27.79 is actually CZK/EUR 0.0359.

Brian Twomey Inside the Currency Market

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