The Czech koruna opened weaker at EUR/CZK 30.565, as the market feared of impacts of French NO and sharp drop of the EUR/USD. However the bet proved to be wrong, and the koruna changed direction to strong rally. It touched one-week high EUR/CZK 30.30 in the afternoon. It’s obvious that investors squared their short position towards central Europe, which they opened ahead of the referendum, because no sell-off occurred in the region. The price action was similar to the Polish market, hence it isn’t any surprise that after a release of surprisingly weak Polish economic growth in Q1 the koruna fell together with the zloty. Hence the market closed European trading at 30.37. Today the domestic calendar is busy as the May budget balance and issuance calendar for Q3 are due. However only figures highly different from the consensus could drive the market. Hence the development on EUR/USD market and in the region might be more important. Situation seems to calm down thus the strong koruna may inspire traders to take profit.
(CSOB - Investment research)