It opened almost unchanged at EUR/CZK 29.85 but the koruna surged quickly higher after less than one hour of trading. Of course, the market digested Thursday’s outcome of central bank’s meeting. Governor Tuma’s words in favor of rate cut in March or April lifted Czech bonds and lured even some foreign interest. It could boosted koruna but we see overall positive sentiment towards the whole region as the most important. The market completely ignores the current political row, which didn’t advance on Friday. That’s only clear a continuation of the present ruling coalition with the same persons is not likely. Early election gets attractiveness for more and more people but not for the key players, Social Democrats and Communists. The polls are not likely without support of either of them. Thus we see a period of instability.
(CSOB - Investment research)