The Czech crown tested the 200-day moving average, but failed as the global equity market turned positive in the afternoon. The pair moved to 24.40 EUR/CZK and eyes today’s Greek protests. The koruna withstood sharp fall of ČEZ share price (largest title on Prague stock exchange) on news that the EU Commission will launch a formal investigation and that Germany (according to the Greens) will not want electricity from Temelin nuclear power station.
The Greek vote is in focus on the Czech markets in the upcoming sessions. We also monitor domestic political scene as smallest coalition party (VV) is about to leave the cabinet on Thursday, which could threaten implementation of planned reforms. Nevertheless we believe that VV is truly afraid of early elections and is going to support the government anyway.
The Hungarian forint strengthened yesterday and outperformed its neighbours. The forint strengthened from an opening level of EUR/HUF 269.67 to close the session at 268.36, supported by a pledge of Chinese Premier Wen Jiabao to buy Hungarian government debt. During the weekend, Wen Jiabao said China will buy a “certain amount” of Hungarian bonds and remains a “long-term investor” in European debt markets.
In the parliamentary discussion, Hungary’s Prime Minister Orban said the country must repay its debt quickly and avoid any talk of restructuring for fear of ending up like Greece. He rejected a suggestion by the opposition far-rigjht Jobbik party that state debt should be restructured. Orban’s government has put reducing public debt quickly at the centre of its economic policies, and has pledged to cut debt below 70% of GDP by 2014.
The Polish zloty posted modest losses on Monday. The EUR/PLN currency pair closed at 3.99 EUR/PLN, even though it managed to breach 4 EUR/PLN level in intraday trading.
We believe that the zloty might watch closely tomorrow’s revision of balance of payments. Current account deficit, which has stood at about 1 bln EUR on average since January 2010, will likely be revised on the upside. If our scenario comes true, the zloty might be under the modest pressure despite the fact, that Polish officials said earlier that the deficit remains well financed by EUR from EU funds. Meanwhile, the zloty should be trading under the impression of the Greek debt crisis.