On Friday, the CEE currencies have wiped out all gains triggered by ECB meeting. The positive risk sentiment resulting from ECB pledge to keep the loose policy stance was outweighed by better than expected U. S. payrolls on Friday. Polish bond yields rose on concerns that the Fed will soon reduce its stimulus program.
The Czech bond market was closed due to holidays, but surprisingly there was also no reaction on otherwise sensitive Hungarian bond market. Today the macroeconomic calendar is interesting in the Czech Republic. The industrial production in May fell on annual basis by 2.2%, which is in line with both our and market expectations. Nevertheless the new orders slightly disappointed and fell by 6.1% y/y.
Nevertheless the new orders continue to bottom out on month on month basis and we continue to bet on a recovery in the economy in the third quarter of 2013.
As far as the turbulent Czech political scene concerns, Jiří Rusnok, authorized by the Czech president Miloš Zeman to form a new government, should today announce the last member of the new cabinet – the finance minister (probably former Prime minister Jan Fischer). Nevertheless we believe that this event will not have any impact on FX market. Prezident Zeman will appoint the new government on Wednesday and then the new cabinet has 30 days to ask the Parliament for confidence. It is highly probable that the government will not gain the confidence and new round of talks with President will start.