The Czech koruna in line with expectation cautiously waited for an outcome from the CNB’s policy meeting yesterday morning. Initially it retreated to EUR/CZK 29.45, later on the unit slowly recovered. The decision to left rates unchanged supported that trend. Therefore the unit pare all early losses by the start of the press conference of governor Tuma. His warning that the Board discussed a rate cut and his warning that the Board might cut rates if the koruna would strengthen further reversed positive market atmosphere. As a consequence the unit retreated back to the 28.46 zone. Nevertheless, the unit was rather unaffected by the bankers’ comments, if we take into account that simultaneously the forint sunk on S&P action.
Today above all the market might digest yesterday’s events. The CNB clearly warns that it will act unless the koruna stops firming. However, we doubt that it will work against the koruna. Therefore the koruna may stay strong today and rise in one week horizon. There are no events on agenda. The market may look at the region and US, where GDP figure is due.
(CSOB - Investment research)