Reuters: Czech crown will strengthen in the next 12 months

The Czech crown is expected to strengthen against the euro over the next year, according to a poll of analysts from news organization Reuters. Amid higher investor confidence, the survey projects that the crown will rise from its current exchange rate of about EUR 1: CZK 25.2 to CZK 24.6 within 12 months. This anticipated appreciation comes amid mixed forecasts for Central European currencies, with the Polish zloty expected to strengthen and Hungarian forint projected to weaken against the euro.

The Czech currency experienced its weakest levels in over two years in early August, at one point exceeding CZK 25.5 per euro. This decline was influenced by domestic economic data and comments from Czech National Bank (CNB) vice-governor Jan Frait, which cast doubt on the outlook for interest rates. Despite global financial market volatility, the crown has recently stabilized, despite the CNB's recent interest rate cut. Falling inflation has also improved the crown’s outlook.

In addition to the Reuters survey, the CNB's own forecasts anticipate a strengthening of the crown, projecting an average exchange rate of CZK 25 per euro for next year, slightly higher than Reuters' prediction. Meanwhile, the Czech Banking Association (ČBA) estimates an average rate of CZK 24.70 for next year, aligning closely with the CNB's forecast.

Raiffeisenbank analysts also express optimism for the crown’s prospects: one analyst told Czech media outlet Seznam Zprávy that "the bolder steps of other central banks and the delayed recovery abroad should help the crown to return to stronger values this year.”

"The main reason for the expected strengthening of the crown will be the gradual revival of domestic economic activity this year," Komerční banka economist Jaromír Gec told Reuters earlier this year.

So far in 2024, the crown has weakened by approximately 2.5 percent against the euro since January, with the Hungarian forint experiencing a larger decline of 4.2 percent. In contrast, the Polish zloty has gained roughly 0.4 percent against the euro during the same period.