The Czech koruna extended its rally yesterday, so the EUR/CZK comfortably fell below the 25.50 level. There were several factors that might have contributed to the recent koruna strength. First, the Czech currency has finally begun to mirror recent positive sentiment with respect to risky assets. Secondly, although ECB President Draghi didn’t speak as dovish as markets expected during his press conference yesterday, he nevertheless promised that ECB policy would remain accommodative “as long as is needed”. This was good news for the Czech currency too. Last but not least, Wednesday’s 50 bps rate cut in Poland could trigger liquidation of some carry trades on the PLN/CZK pair providing support for the zloty and depreciate koruna in previous weeks.
Today’s set of fresh figures from the Czech economy has been a mixed bag. Although the Czech foreign trade recorded, once again, a huge surplus in January (CZK 31.5bn), January unemployment figures clearly demonstrated that the economy remained weak as the number of unemployed people (594 thousand) was above the level known from the times of the deep recession following the collapse of Lehman Brothers in 2009.