The EUR/CZK currency pair yesterday again had quite an uneventful trading session, even if there was an important event for the region with all eyes on the outcome of the Polish central bank decision. EUR/CZK started the day trading just above the 30-mark and held in that area throughout the session. The zloty didn’t feel any negative impact from the Polish rate decision and also the impact on other currencies in the region was limited.
The government reached a deal with the central bank, which allows it to mobilize a fraction of privatisation revenues (including CZK 16.5 bln from the sale of Cesky telecom) that was on a special account with the national bank to serve as collateral for a government guarantee to the central bank. The government proposed to pay back the guaranty in advance (funded by a bond), which will allow it to fully mobilize the privatisation proceeds. The transaction (subject to approval in Parliament) won’t have much impact on the currency but gives the government some budgetary room of manoeuvre. The Lower Chamber of the Czech parliament yesterday also adopted a law that, if approved by the upper chamber and the president, could open the way for a referendum on the EU constitution. However, the outcome of the next steps in the legislation process is still far from certain. Today, the focus is on the Czech central bank interest rate decision. The bank is largely expected to hold rates unchanged and this event should not change the course of events on the currency market. We don’t see a trigger yet to move the EUR/CZK pair out of its sideways range close to/just above the 30-barrier.
(CSOB - Investment research)