The Czech crown extended losses and moved closer to the 200-day moving average near 24.50 EUR/CZK. Besides the uncertainty related to Greece, the dovish stance of the CNB and threat that the current coalition will not survive this summer could be cause of concern for the koruna.
The Czech calendar for the week ahead is empty and the Greek reform vote and subsequent reaction of EUR/USD should be crucial for the pair. There should be certain relief if the measures pass by the end of the week. Nevertheless, untill the results appear, the pair may try to retest 200-day moving average or 25.00 EUR/CZK. Interestingly, the deterioration of the market sentiment has been currently seen in the fixed income markets as the Czech CDS move higher in recent days.
The Economic Committee of Hungary’s parliament discusses a 2011 budget amendment today. “After monitoring economic processes this year, it has become clear that tax revenues will likely come in below plans, and certain expenses are expected to be higher than the amount approved in the budget law.” The amendment is necessary to fix a projection mistake made in September 2010, while keep the 2.94% budget deficit target for 2011 intact. However, regarding trading, international developments will probably be the main focus.
The Polish zloty outperformed the rest of regional currencies on Friday. The EUR/PLN currency pair strengthened back below the 4 EUR/PLN level. Today, the Monetary Policy Council member Jerzy Hausner said that inflation should return to the target (2.5% y/y) in about a year. Hausner added that it was hard to say that the monetary policy was restrictive when the inflation stood at 5% y/y level and that monetary tightening is unlikely to significantly hurt the economy. Hausner also said that the NBP should not say that the hiking cycle is over.
Apart from the closely watched situation in Greece, two domestic events might influence the zloty’s trading. The first one is a long-awaited revision of the “Errors & Omissions” line in balance of payments. The latter is a release of inflation expectations (our analysis as well as NBP statements suggest that the NBP is partially sensitive to an increase in inflation expectations).