Central Europe starts raising interest rates

5:12 PM 23 June 2021

The Czech National Bank raised interest rates by 0.25 percentage points to 0.5 percent, thus following in the footsteps of the National Bank of Hungary. This widely expected move was caused by concerns regarding rising inflation related to the ongoing economic recovery, and many analysts anticipate two more rate increases in the second half of the year. During the press conference, central bank governor Jiří Rusnok said that four of the central bank’s board voted in favour of the decision, one of whom wanted to raise the key interest rate by as much as 0.5 percentage points. Only two members voted to leave interest rates unchanged. 

This is the second interest rate hike this week in the region of Central Europe. Yesterday, the National Bank of Hungary decided to make a similar move, raising rates from 0.6 percent up to 0.9 percent for the first time in nearly 10 years.  It seems that some countries in this region approach the issue of rising inflation with greater caution compared to the FED and the ECB.

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USDCZK  pair has been trading in a downward trend for a long time. Recent dollar rebound, which started after the last FOMC meeting, halted near major resistance at 21.60. Currently, the pair is headed towards the 21.12 level which should provide significant support. However, should the break lower occur, then the pair may resume its downtrend and move towards the recent lows at 20.70. On the other hand, if buyers manage to stay above 21.12, another attack on the resistance at 21.60 will be possible. Source: xStation5

Looking at the USDHUF chart on the D1 interval, the recent dollar appreciation decelerated around  HUF 300.00 level which coincides with, 61.8% retracement of the recent downward wave. If the current sentiment prevails, then decline could deepen towards the major support zone at HUF 289, which is marked with previous price reactions and 23.6% Fibonacci retracement. A break below this level could in turn open the way towards support at 283 HUF. Source: xStation5

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