Euro or EUR is an official currency approved in the EU. It is thought to be stable enough and demonstrates high liquidity because the economy of developed countries strengthens it. It is mostly influenced by the statements of the European Central Bank and political decisions made by the leaders of the commonwealth countries.
If we speak about the currency from the economic point of view, EUR isn’t strictly bounded to any material factor or the goods. That’s why it’s one of the top instruments in the world of trading.
Czech krone or CZK is a Czech national currency. The country refused from switching to euro, but up to 2017, its national bank (CBC) supported the binding to euro with the rate of 27 CZK for 1 EUR.
CBC has to refuse from strict binding and let the rate because of the fast growth of the Czech economy and a high risk of deflation. Euro got cheaper until 25-26 Czech Krones as a result.
At the same time, traders started to get interested in this pair. It happened as long as at the end of 2017 – the beginning of 2018 the course volatility increased 2.5 times, and the lack of regulation led to opening the price corridor.
All the hype around this currency pair ceased to exist rather quickly because traders managed to see one severe disadvantage, which was represented by low liquidity. Even though the government didn’t regulate it, the krone’s rate quickly evened and entered an extremely narrow price corridor.
Nevertheless, it’s still possible to trade EUR/CZK, and the way out is the country’s economy events. The news about this can increase the pair’s liquidity and rise the variability.
The Czech economy is a leader as long as the oil prices are low. The figure explains the situation: crude oil and oil products represent more than 8% of the total import. On the other hand, low prices for oil hold the growth of CPI and, as we can conclude, strengthen the crown.
Indeed, the Czech economy develops. However, compared with Hungary and Poland, it depends a lot on the world automobile industry both in assemblage for export and a part of cars for sale.
About 20% of Czech export is connected with the automotive industry. Almost 78% goes to Europe and in particular, the EU countries and Russia.
A big part of this export goes to Germany (it’s the figure of almost 29%), while less than 2% go to China, the US, Japan, and India. To be more specific, the Czech economy expansion depends on Europe very much.
All of this should grow interested among traders. Compared with the majority of Eastern countries of Europe, Czech can boast a stable and relevant base for economic development. That’s why we can state that krone is rather safe and steady.
And now let’s turn to the relationship with Germany. If the German economy grows, they will spend more money and flow them into their partners’ economies. This way, krone will be even stronger compared with the euro. If the German economy weakens, the same thing will happen to CZK.
Traders also have to consider the financial news. First, we are speaking about the monetary policy of the Central European Bank and CBC. Euro will be cheaper if the interest rates of krone rise.
Now the pair is in the price corridor from 25, 4 to 25,9 Krones for 1 EUR. This is a narrow one, and you shouldn’t count on excellent benefits. As a result, so don’t make long-term bets.
On the contrary, short positions can bring nice and quick profit if we take into account the relevant news. But such orders are hazardous, so it’s better to support them with one or two additional bets.