The Czech currency still decouples from a regional developments as EUR/CZK moved slightly south. The EUR/CZK closed the week at 28.46, or slightly firmer despite heavy seen in the Hungarian and Polish market last week. Small update of the Czech political deadlock: while an coalition agreement among the conservative ODS, Christian Democrats and Greens should be signed today, the coalition is still lacking a majority in parliament, so tough negotiations are still ahead of us. To win a confidence vote, the coalition needs to get support from at least one deputy of the left-wing Social Democrats. So far their leader and current PM – Paroubek – refused to do so, moreover he was upset during weekend’s comment made by president and ODS’s ex-chairman Klaus, who indicated that if the center-right coalition failed to win confidence in Parliament, Paroubek should not expect to be asked to form a government in the second bid.
Today, the market should definitely focus on regional developments, while domestic politics could be interesting too. While regional sentiment is still very fragile and domestic politics is not supportive either the Czech currency will hardly record significant gains. On the other hand, the EUR/CZK proved during last several sessions that the pair is not ready for a break above 28.60 the resistance.
(CSOB - Investment research)