CZK/USD Exchange Rate Forecast Ahead of June Federal Decision

  • CZK/USD exchange rate swayed within a horizontal range over the last seven years.
  • Let’s check how June 2023 can end this extended range.

June remains a fascinating month for FX market players and monetary policy. All leading banks (e.g., European Central Banks, Bank of Japan, and the Fed Reserve of the US) will announce their financial policies. Furthermore, volatility will heighten as of next week.

Meantime, FX traders can find lucrative opportunities in emerging markets. For instance, the Czech Republic has presented impressive potential as an upcoming economy. Czech Koruna, its local currency, has soared against the United States dollar since December 2022. However, how will the Fed policy impact the CZK-USD exchange rate?

The Czech Nation Bank Stares at Inflation Challenges

During the previous Bank Board conference, the Czech National Bank decided on a 6% discount rate and a 7% 2-week repo rate. These aren’t far from the US’s valid point of 5.25%, especially when considering Czech Republic’s inflation compared to US’s yearly inflation rate.

At some point, following the COVID pandemic, Czech Republic inflation hit 18%, nearly double the Unite States’ 9.06% in June 2022. However, the issue is the two central banks have similar price stability obligations – lowering inflation to 2%. Thus, if the Federal pauses rates next week (according to rumors), the Czech National Banks might hike rates again to battle high inflation.

International Monetary Fund revealed that the Czech Republic will see increased GDP in the next five years. However, the Real GDP – which accounts for the country’s inflation, indicated modest growth.

CZK/USD Trades Inside 7-Year Tight Range

CZK/USD has seen an extended horizontal consolidation. The currency remained within a range over the past seven years. However, two things might shift that narrative. Firstly, the Federal might pause hikes – dovish for the USD. Nonetheless, hawkish rhetoric, including hints of July rate hikes, might see the greenback appreciating. Thus, enthusiasts can watch a drop beneath 0.044.

Secondly, the CNB Board will announce its financial policy on 21 June. Considering the inflation gap mentioned before, rate hikes would benefit Kurona. That can see the CZK-USD exchange rate testing the resistance at 0.048 again.

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