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

• by Tyler Durden

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.

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.

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