The koruna moved slightly lower in quiet trading

The Czech local forex market was the only one which was opened in Central Europe on Monday, thus the atmosphere was rather relax. The koruna strengthened in thin market to EUR/CZK 31.45 on Friday. There was no particular incentive for the move, but squaring of positions in euros ahead of long weekend could weighted. On Monday the koruna opened a bit stronger but later on lost about half of the Friday’s gains to close at EUR/CZK 31.50 zone. Released high October’s government budget deficit didn’t have any impact on the market. The budget showed CZK 19 bn deficit in October, pushing cumulative deficit to CZK 59.5 bn. Nevertheless, the deficit is still much lower than in the same period of the last year. The FinMin paid a loss of the state Konsolidacni agentura last month. We still believe the budget will post significantly lower deficit at the end of the year than was approved.

Today the market may come back to regular activity. However, we do not expect a significant price action, as traders may wait for a trade balance figure due on Friday. Nevertheless, the conditions are in favour of little stronger koruna this week, because of an expected low trade deficit.

ČSOB - Investment Research