The Slovak koruna stuck in a sideways range moving between the 37.70 and 37.76 area as the market lacked impetus due to holidays in UK and US and no data from the domestic scene. The main event today, is the interest rate decision by the NBS. Based on increased upward inflationary pressures, weak koruna, recent hawkish comments from the governor Sramko and last but not least close call of the April meeting, we expect the rates to be hiked.
The only question in our and the market’s mind is: by how much. The market is split between 25-50 bps hike. We lean for 25 bps hike, although a 50 bps hike could also arrive. This decision should be a short-term supportive for the koruna, but we don’t expect any significant strengthening. Upcoming elections (June 17) and continuing dividend payouts still weigh on the currency and don’t allow it to collect a lot of gains. NBS is going to hike. But how much (3M BUBOR, daily) ?
(CSOB - Investment research)