The Czech koruna opened weaker at EUR/CZK 30.30, but was gaining the ground in the morning. All CE currencies were initially under pressure, as the US dollar jumped to 1.29 in Asia trading. Later on, the atmosphere improved, since the dollar stopped rising. The koruna even touched 30.18 around 2 p.m. on better sentiment. Nevertheless, environment changed again in late afternoon as the Polish MPC cut interest rate more than expected and the euro failed to rebound on surprisingly weak US durables orders. Thus, the Czech currency closed only little stronger at 30.28. There was no important domestic events, which could have affected the market. Only a threat that 5 MPs within the Social Democrats are reluctant to support the new government might have had some negative influence. However, we believe that they will vote for the government in the end.
Today a meeting of the central bank’s board is the key event. We and the majority of the market do not expect any rate change thus we do not see any market reaction to it. The EUR/USD price action may be crucial again today. Weakness of the euro leads us to a conclusion, that the koruna may feel again some light pressure to lose some ground.
(CSOB - Investment research)