Falling equities, rising risk aversion, domestic political deadlock and mainly problems of other regional currencies have been pushing the EUR/CZK slowly north. Even though the pair did not leave its favorite range 28.10-28.30, it was trading right below the upper edge of this range at the end of Friday’s session.
As concerns domestic politics, no progress has been seen, moreover leader of the winning conservative ODS Mirek Topolanek made it clear again that he gives no chance for forming of a grand coalition with the Social Democrats. Interestingly, Topolanek added that if he was not able to form a government with Christian Democrats and Greens (this coalition is still missing one vote to get majority in parliament), he would opt for early elections. Let us point out that it was the first time when ODS leader spoke openly about a choice of early elections.
Today’s starts with a release of the April industrial production, which according to the CSO grew just by 3.6 % y/y. The lower-than-expected figure is in line with the slowdown of the slowdown of industrial activity in the region notably in Hungary. Nevertheless, we do not think the data should have any visible impact on the currency. In our view regional developments should be decisive especially the Polish and Hungary’s politics.
(CSOB - Investment research)