On Friday, the Slovak koruna held stable at the 37.84 zone for a major part of the day. There was no fresh news to guide the market and the unit also digested quite well poor foreign trade data. The May inflation published today will get some attention, but it is unlikely to be a strong catalyst for a spectacular price movement. The key events for the markets will be parliamentary elections that take place this Saturday, June 17. Opposition leftist party SMER leads in the polls, with around 30% of the vote.
The actual election outcome is difficult to predict as experience shows that in Slovakia polls are not very indicative of the actual vote result. However, the leading SMER will with high probability form the next government, in our view. But due to the high fragmentation of the political scene there are a number of options for a future government coalition. We continue to see volatile trading ahead of the elections and the unit will probably retreat to weaker levels close to the 38.0 due to investor’s positioning. We don’t exclude this level to be crossed for a short-term.
(CSOB - Investment research)