On Friday, the EUR/CZK pair finally broke
through the key resistance at 28.385 as
several big orders from London based
names triggered a successful attack on this
key barrier. The break activated several
stop-losses and as a result EUR/CZK quickly
marched above the 28.50 level just before
the domestic closing. As said several times
last week, the Czech currency amazingly
shrugged-off weakness of other CE
currencies. Friday’s session was, however,
completely different and CZK apparently
tried to catch up with losses that had been
seen in other Central-European FX markets
last week.
Koruna finally broke resistance at 28.385
Finally, it looks that there is a chance for a
breakthrough in the post-election deadlock.
The current prime minister and leader of
social democrats Paroubek indicated that his
party might tolerate (under certain
conditions) the forming center-right coalition
of the conservative ODS, Christian
Democrats and Green Party. This should be
modestly positive for the koruna. However, it
is still a long way to go to get support for
such a cabinet as Parobek also said that
Soc-Dem would not vote for the government,
which wants a flat tax or privatization of
public services. These were the main
promises in ODS’s economic programme.
Nevertheless today, the Czech currency will
closely watch the forint and its reaction on
the NBH Monetary Council meeting. Should
the forint remain weak, it would be difficult
for the EUR/CZK pair to turn back south and
dip back below the 28.50 level.
(CSOB - Investment research)