The Czech koruna stayed under pressure and touched 25.70 EUR/CZK on the weakness in major equity indices. The outcomes of Italian elections lead us to revise our outlook on the Czech koruna. Higher risk aversion together with slower growth of main trading partners means weaker koruna over the one year horizon.
Our one month target is currently 25.70 and 12-month 24.70 EUR/CZK, both revised higher. Today, the Economy minister Gyorgy Matolcsy was nominated to lead Hungarian central bank. As this was widely expected, we have not seen any major reaction on the markets. Matolcsy is well known fan of rather unorthodox measures and NBH is going to be probably even more dovish under his leadership. Mihaly Varga, currently responsible for talks with the IMF, should replace Matolcsy as the Economy minister according to Orban. In Poland, the GDP figures surprised positively (the economy did not contracted at the end of the year, but grew at 0.2% q/q.). This together with improving leading indicator (our Polish Flash) and better performance of industry in January should keep the board on hold in March. There are two disturbing issues to our call. The first is declining inflation expectations that are currently below NBP inflation target. The second is the structure of the growth. Although the Polish economy expanded in the fourth quarter, the individual domestic consumption and investment continued to decline.