The Czech koruna still ignores domestic political situation. On Tuesday, the High Court defeated charges against 3 members of Parliament accused of corruption, which led to the fall of the government. Yesterday, the Parliament rejected the proposal of the Social Democratic Party to dissolve itself, allowing political uncertainty to last throughout summer holiday. Nevertheless, at least for now, the koruna has disregarded political wrangling and has remained stable just below 26.0 EUR/CZK.
The Polish zloty, on the contrary, has strengthened yesterday. The zloty was supported by the latest dovish semi-annual Monetary Policy Report presented by the U.S. Fed chairman Ben Bernanke. In addition, the zloty was underpinned by surprisingly high industrial output. The Polish statistical office said yesterday that industrial output rose by 3% annually in June, which – compared to the May’s decline of 1.8% y/y - signals substantial recovery. Recent Hungarian developments are worth mentioning as well. Yesterday, markets were frightened by the news that the Hungarian government was planning to modify households´ FX contracts retroactively. Economy Ministry Mihaly Varga refused to give any further details and only confirmed that the government was in talks with commercial banks and planned to discuss the topic on its July 24 meeting. Although worries have been justified due to historical experience (first government attempts to convert FX mortgages to forint date back to 2011), positive sentiment from dovish Fed comments prevail and the forint wiped out all its losses by the end of the session.