'Czexit' Looms As Traders Bet On Czech Republic Breaking Euro-Peg

Tyler Durden's picture

Czech inflation spiked in the last two months, hitting the central bank’s target for the first time since 2012, heaping, as The FT reports, additional pressure on the country’s soon to be expired currency regime with the euro.

Along with on-target inflation, the Czech Republic also boasts the lowest rates of unemployment anywhere in the EU at 3.7 per cent.

Having kept an upper limit on the koruna in a bid to control inflation over the last three years, the central bank has been forced to buy up foreign currency at a faster pace to keep the regime steady. The koruna has been kept at around CZK27 against the euro since 2013, but policymakers have warned they are likely to scrap the regime at some point this year.

So Is a 'Czexit' on the cards?

Analysts at ING forecasting an end to the managed exchange rate system around April or May this year...

“It shows that the market is positioning against the CNB floor more intensively, as accelerating inflation is increasing the odds of the approaching exit”, said Jakub Seidler at the Dutch bank.


Mr Seidler now expects the currency regime to be scrapped around April or May, with annual inflation forecast to climb from 1.5 per cent to 1.9 per cent in December – close to the central bank’s 2 per cent target.


“If the intensity of interventions saw during the first days in January continues in the first quarter of 2017, total interventions in the quarter might easily overcome the whole 2016-levels”, he added.

And judging by the forward market, traders seem to agree...


As a reminder, during the summer of last year, the outspoken President Milos Zeman ("prepare for a Muslim super-holocaust") says his citizens must be able to "express themselves" on E.U. and NATO membership.

The Czech Republic’s President Milos Zeman has called for a referendum on the country’s membership of both the European Union and NATO, the latest example of fallout from Britain’s vote to leave the E.U.

Zeman says that he personally backs the country remaining in both organizations, but said on Czech Radio that he “will do everything for [Czechs] to have a referendum and be able to express themselves. And the same goes for a NATO exit too,” Reuters reports.

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larz's picture

Soros' dream fading fast.  Afraid of what a rat like him does when cornered

Raffie's picture

Would rather Soro fade fast.

What a scumbag.

WTFRLY's picture

like Pringles, once you pop, you can't stop

zuuma's picture

Does this mean we can get CZ rifles more quickly?

I want a CZ .22, so I say Leave the Euro!

Dame Ednas Possum's picture

Please advise... say someone had a stack of CZK cash in the sock drawer, does the above situation mean that it will lose or gain purchasing power?

All jokes aside... would it be best to buy something tangible with the cash before or after suggested re-peg in a few months' time? (Noting that there may be little difference in purchasing power locally if buying something made within CZ borders).

I'd appreciate your (*sensible) thoughts. Thanks.

Albeit 'hookers and blow' is always an option.

Nothingman's picture

The CZK will decline in value, relative to the Euro, upon cessation of central bank intervention, according to this article.  It's been artificially propped up by the Czech central bank, but that is coming to an end.

BandGap's picture

Isn't this in addition to the attrition to inflation?

Dick Butkus,

Dame Ednas Possum's picture

That's what I suspected. Thanks. Much appreciated.

Jurassic's picture

nope, euro will decline.

They [CNB] have been intervening for more than 3 years to weaken CZK. like SNB used to do before de-peg

Cundium's picture

Complete bullshit. Read again the article, boy!

cuxxy's picture

There's no Euro peg. The current currency regime has nothing to do with Euro. It was implemented only to drive up inflation and to encourage economic growth. After the regime is abondoned koruna's value will go up! Not down. Stash of CZK under the mattress is good business.


their economy is the strongest in the region (behind Germany) so if they exit, their paper will go up in value compared to the euro.  

unless they are invaded by russia, then all bets are off.

unless they are invaded by the EU, then all bets are off.

unless they are invaded by aliens, then all bets are off.


but if they are not invaded, then their paper is better than the Euro.

Cundium's picture

Not so  much -it is economic colony of Germany....

Why Russia would invaid Czech? They dont have even a border. The US would by pissing blood before this happens.

EU invasion is most likely. Or rather EU assholes punishment...

Most definately the local fiat is one of the better.


BarkingCat's picture

How the fuck would Russia invade Czech Republic. Have you even looked at a map before making the idiotic comment?

AvoidingTaxation's picture

purchasing power will stay the same, but CZK value against USD and EUR will go up

Bill of Rights's picture

Hopefully he chokes on hi Geritol tonic...

TheRedScourge's picture

The correct term should be "Czechout"

jamesmmu's picture

No wonder stocks are rallying, this is bullish.

Justin Case's picture

Rebels they are. They also refused to extradite a hacker to the paws of the empire. Oh no! That sound you hear is a sanctions meeting against the Czechs. Putin encouraged the revolt. Sanctions on Russia, oh wait that's already in effect.

Ghordius's picture

"That sound you hear is a sanctions meeting against the Czechs"

and? economic and trade sanctions are less easy to put on a EU country. because the group reacts and retailiates as a whole. it's built in, it's part of the design, too

example: Switzerland's banking industry in Washington's stare, lately
example: the Czech currency's "markets vs national bank" standoff

Justin Case's picture

Not much coming out of the cheer leading crowd on Brexit though. They all want out of that bureaucracy, don't kid yoar self. It's a bad PTB experiment and it's folding like a cheap lawn chair. It's a flawed concept from the thought of it.

Justin Case's picture

The president elect of the US, Mr. Trump, does not know what he is doing when he proposes protectionist measures to encourage the reindustrialization of the US and bring home again, the American industry that emigrated to foreign lands.

The US lost their industry as a result of the Bretton Woods Agreements, which were signed (under pressure) by representatives of the allied countries and of the countries conquered by the US in World War II. Those Agreements established the world's monetary system for the post-war world, after the victory of the Allies, which was already in sight in 1944.



Publicus's picture

The European Union will be defeated by the free and sovereign people everywhere!

Grandad Grumps's picture

Woot ... being of Czech (well it was actually the Austro-Hungarian empire at the time) decent, most of my grandparents came from one end or the other of Czechozlovakia ... I like to see the Czech leadership and people saying "no" to global slavery.

UnschooledAustrianEconomist's picture

Czech is the best country in Europe to be. No goat fuckers, highest quality of living of all "Eastern" European countries, awesome landscape, and Prague as a cultural power house.