Czech currency trading started the week in a low gear

The Czech koruna opened the day close to the strongest levels of the session just above the 28.30 mark. From there it drifted slightly weaker throughout the session, in line with the region. However the losses were no more than a few halers. The market apparently digested last week’s CNB decision to leave interest rates unchanged. The fact that the CZK didn’t go for a test of the highs at around 28.225 suggests that it needs some kind of high profile event to force the break of this key level, at least for the short term. Yesterday, a group of exporting companies again warned on the possible negative consequences of the strong koruna for the Czech economy. However, given the CNB´s reluctance to cut rates as illustrated by last week’s decision it didn’t impact CZK trading to a large extent.

Today, the focus in the region is on the Polish interest rate decision. A positive reaction on the regional bond markets in case of a cut also might be a mildly positive for the CE currencies. However, we doubt it will be enough for the CZK to retest the highs against the single currency. We expect more wait-and-see behavior ahead of the ECB interest rate decision on Thursday.

(CSOB - Investment research)