The Czech koruna opened slightly weaker and traded around EUR/CZK 29.64 on Friday morning. There was no incentive for the market hence traders waited for Today’s foreign trade data and progress on the political scene. They, of course, watched the euro dollar currency pair and other CE currencies. Finally, the EUR/USD proved to be the most important driver of the koruna, as the dollar plummeted after worse than hoped the February US payrolls. Dollar’s drop positively inspired the whole region and the koruna touched at EUR/CZK 29.525 its strongest level since July 2002. However, the unit retreated from the high and closed at EUR/CZK 29.60.
Today the koruna might be supported by another good foreign trade figure, which posted a surplus of CZK 3.45 bn in January. That’s more or less in line with expectations therefore no strong reaction of the koruna should be expected. The last figure confirmed recent positive trend which should lead to a negligible trade deficit for the whole year. The current political row shouldn’t affect the market, too. The PM Gross got the strong party backing of the leadership of his Social Democrats on Saturday. However, that might not lead to the end of the dispute within the coalition. Contrary, it only deepened the stalemate between Gross and Christian Democrats’ leader Kalousek. Therefore, the most likely scenario is now a ceasefire until the Social Democrats’ congress at the end of March. Moreover, Gross made a public excuse for some of his words (but not action), which didn’t satisfied anybody. Summing up, we see room for some cautious koruna’s gains, because the political situation shouldn’t escalate before the congress.
(CSOB Investment research)