While the Czech koruna weakened and hit an 11-day low, the Polish zloty extended previous gains and reached a 19-day high on Wednesday. With respect to the koruna, a recent presentation (available on the CNB website) delivered by Lubomir Lizal, a member of the Czech National Bank’s (CNB) board, might have played a role. The presentation supports our view that Mr. Lizal ranks among three (out of seven in total) CNB board members who have been consistently voting for interventions against the koruna. The document contains a thorough defense (leaning on several recent working papers) of the tool under current conditions of interest rates set close to zero. In his concluding remarks, Mr. Lizal argues that FX shocks may have several times stronger impact on the economy (and prices) than in “normal” times.
Regarding the zloty, a higher than expected wage growth in September played in favor of the zloty yesterday afternoon. The zloty breached a support at EUR/PLN 4.173 to dip later as low as to 4.162 (the strongest level since 19th September). Even though yesterday´s wage data validate predictions of a gradual pick-up in economic activity in Poland, we continue to bet on a longer period of stable rates;
Also Jan Winiecki, one of the hawkish members of the Monetary Policy Council, spoke yesterday in favor of keeping rates at record lows in the months ahead...