On Wednesday, the Central European currencies experienced a calm session. The Polish zloty slightly extended its previous gains and was almost exclusively trading between the resistance at EUR/PLN 4.1733 and the 200 days moving average (4.1573). Let us recall that the recent zloty’s gains were driven primarily by decreasing bets on a rate cut in March following the release of better than expected industrial production figures. Yesterday, a dovish member of the Monetary Policy Council, Elzbieta Chojna-Duch, said that there may not be enough votes in the MPC for further easing next month.
Yesterday’s auction of Czech government bonds showed solid persisting demand for both the 3-year and the 15-year (the first tranche) bonds; bid-to-cover ratio in both cases reached about 1.5. Although demand for the three year bonds slightly diminished compared to a similar auction a month ago, we believe that Czech bonds will remain well bid in the months to come as the Czech government has already pre-financed a significant portion of this year’s financing needs.