The Czech koruna kept in a tight range of
31.60 and 31.68 yesterday. The market was
waiting for outcome of parliamentary
confidence vote the whole day. Thus
traders ignored comments of Finance
Minister Sobotka on interest rates and
privatization revenues. Gross’s
government finally won parliamentary
approval late in the evening after the
market was closed. We are doubtful that
the koruna will significantly react on the
approval, because the positive result was
broadly expected. The new government pledge to proceed with fiscal reforms. On
one hand, the cabinet may propose more
ambitious reforms. However, on the other
hand they will suggest several measures to
improve popularity of ruling Social
democrats, which could balloon budget
deficit.
Today, the koruna should stay in the same
range as yesterday. Government approval
should have only limited and short-lived
positive impact. The market may abate
outcome of 15-year benchmark tender.
Nevertheless, main attention will catch
tomorrow’s central bank decision on interest
rates.
ČSOB - Investment Research