CE currencies gained as expectations on QE3 and positive outcome of German Constitutional Court ruling helped the whole region. The Czech koruna broke through one year high at 24.42 EUR/CZK and subsequent stop-losses pushed the pair as low as 24.28.
Current Central European rally was triggered last week as ECB announced intention to intervene on peripheral bond markets. Looking ahead, the German Constitutional court and Fed meeting are going to be crucial market movers in the region. Nevertheless even in a case of positive outcome, we do not see much scope for further strengthening from a fundamental point of view. The economic outlook is darkening and we expect all the regional banks to cut interest rates further soon.
In Poland inflation figures, scheduled for Thursday, should be crucial for the timing of interest rate cut. If it falls below 4% as we expect, we may see interest rate cut as soon as in October