The Czech koruna fell yesterday, as the
drop of the dollar is the most likely incentive.
The koruna slid together with the Polish
zloty, which is much more sensitive to the
EUR/USD movement. Moreover, the
domestic currency is under pressure of the central bank view on interest rates change.
The stream of the central bank’s officials
words didn’t stop yesterday. First, a clash
between the central bank and the Finance
ministry arose after previous vice-governor
Niedermayer skeptical words on the euro
adoption in 2010. The ministry objected the
statement. Later on, the central bank tried
to mitigate the quarrel, as it said the decision
of the next government, starting its term in
2006, would be crucial. Yesterday two other
members of the CNB Board, particularly
Pavel Racocha and Pavel Stepanek, talked
in favor of stable interest rate outlook.
Moreover, they added new inflation report
will not significantly changed outlooks for
inflation and GDP. Finally, governor Tuma
said wage growth in 2005 would pose no
inflation risk. Summing up, no one could
believe in rate hike in foreseeable future
now. Nevertheless, that’s unclear why the
central bank after years of silence and
cautious words starts heavily communicate
with public. The only reason may be a campaign ahead of a CNB board redesign in
February. The Convergence report released
yesterday brought nothing interesting. It is
critical to high the Czech public budget
deficit and praised low inflation and long
interest rates.
Today the koruna may again watch the
EUR/USD development, as the calendar is
empty. Thus we expect another slight
weakness.