The Czech koruna moved down and up and close slightly firmer below the EUR/CZK 28.40 level. The intra-day development reflected in the first stage an ongoing bearish sentiment in core bond markets and secondly a modest rebound of the Polish zloty.
Interestingly, a new coalition deal just signed by the conservative ODS, Christian Democrats and the Greens does not contain any phrase related to the euro adoption. In our view, the absence of the euro in the ten-pages coalition contract is quite significant. It is just reiterates our opinion that this coalition will be hardly a driving force that would be pressing for quick euro adoption. In such a political set up the deadline the euro entry will be postponed beyond the horizon of the year 2010.
Today, the eye-catcher for the Czech FX market should be a board meeting of the neighbouring National Bank of Slovakia. Recall that the latest NBS FX intervention helped the Czech currency rebound last week, so any action (a hike) from NBS could provide some indirect support for the Czech currency. Nevertheless this not our central scenario, hence we rather expect sideways trading close to the EUR/CZK 28.45 level.
(CSOB - Investment research)