National Bank of Slovakia (NBS) decided to stop the depreciating trend on the FX market and intervened to support local currency. Slovak koruna moved through the mid-point of the ERM-2 band (38.455) which correspond to 7 month low. Central bank appeared at around EUR/SKK 38.550 on the market. We think a lot of stop – loss orders were at these levels. Therefore, koruna should depreciate much quicker beyond these levels without intervention. NBS added that they are ready to react to unjustified crown moves also in the future. ). The size of the intervention is unknown but we reckon it could be around EUR 200-300 mil. Political risk is definitely still around.
Smer and right – wing parties negotiated on Wednesday. Smer leader Fico said that his party has little in common with SDKU. Therefore, we see the Smer + SNS + KDH or Smer + SMK + KDH as two most probably coalitions. The scenario of Smer + HZDS + SNS coalition as the worse case is still not out of the game. We expect consolidation today. But further weakness is not ruled out as the political temperature is rising. Fico told reporters on Wednesday that Slovakia should consider whether it is in the country’s interest to stick to the goal of adopting the euro in 2009.