Reuters: Czech crown will be strongest-growing currency in CEE this year

A recent report from news agency Reuters has revealed that the Czech crown will be the only currency in Central Europe to strengthen in the next 12 months. This development is because other currencies in the region face persistent stability risks or have limited room for growth.

The crown currently stands at EUR 1: CZK 25.38. Analysts believe that it could drop below CZK 25 in the third quarter of this year, potentially dipping as low as CZK 23.4 by December or early 2025. The next couple of months will see it hover around CZK 25.3 as the economy continues its gradual recovery from 2023 levels.

"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. In addition, a high foreign trade surplus can also positively support the domestic currency. According to data from the Czech Statistical Office released Monday, the surplus in February amounted to CZK 34.6 billion – CZK 19.7 billion more than the year before.

A relatively large forecast spread illustrates the estimate's uncertainty - from CZK 23.40 to CZK 26.50 per euro. However, institutions that have made long-term estimates for the crown in the Reuters report are confident that it will reach CZK 24.4 within a year. 

Although the Polish zloty has recently strengthened against the euro – and is currently near a four-year high – analysts say there is not much more room for growth. Hungary’s forint continues to depreciate against the euro due to weak fundamentals and the reduction of interest rates.

However, experts warn that the 2024 U.S. election may affect the crown’s trajectory. Economists from investment firm Patria Finance and bank ČSOB tell Czech media outlet Seznam Zprávy that if presidential candidate Donald Trump wins the election and increases tariffs on the EU by 10 percent, it could have a significant impact on German exports and investments, which would ultimately be bad news for the euro and all Central European currencies – including the crown. Moreover, a Trump victory could also lead to higher U.S. inflation and interest rates, posing another challenge for the crown.