The Czech koruna eased as it tracked the Hungarian forint lower, while uncertainty ahead of ECB meeting played its role too yesterday. The losses were (again) relatively modest as the EUR/CZK was not able to brake above the 28.30 resistance.
As concern a development on the domestic political front no breakthrough of the political deadlock have been visible. Moreover, the second biggest party – the Social Democrats - indicated that it is not ready to tolerate the forming coalition of the conservative ODS, Christian Democrats and Greens. This stance elevates speculations that the Social Democrats bet on a scenario of the grand coalition with the ODS. Though we do not rule out such a scenario, we think that we are still rather far form such a solution, since it implies that the leaders of the main two parties would have to resign. Today a release of GDP figures for the first quarter is in focus. The economy grew 7.4% y/y – hence in line with market expectations. The economy is still driven by net exports and investments, which is very positive and underlines the long-term appreciation of the CZK. Nevertheless in a short-run the EUR/CZK seems to be locked in a tight range of 28.10-28-30.
(CSOB - Investment research)