Macroeconomic Forecast Czech Republic

The Czech koruna moved higher against the euro through the latter stages of July, breaching CZK25.00/EUR for the first time since the global financial crisis unfolded in late-2008. While this move higher takes the unit beyond its recent trading range, we do not expect a significant strengthening of the currency through H210 due to the domestic economy's dependence on export demand for growth generation, which makes the central bank likely to intervene to stem any sizeable gains. We forecast that the koruna will come in at CZK/EUR at end-2010.

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