The Slovak koruna had a strong session yesterday, firming from the opening 38.25 to 38.10 boosted by improved sentiment in the region. Today, the central bank announces its monthly interest-rate decision. We expect the repo rate to be left unchanged at 4.0 % in line with the market consensus. If our expectations prove to be correct, the market will probably fail to receive any stimulus.
The tone of the central bank statement, however, will be crucial: a less hawkish comments could decrease the intensity of current short-term rate hike expectations. Contrary, more hawkish words might support the unit to some extent. The Bank Board member Peter Sevcovic said yesterday the bank will raise interest rates if a new government boosts spending. Also today, SMER will continue discussions on the coalition with HZDS, SNS and SMK. All in all, despite recent strengthening, the koruna is expected to remain sensitive to any changes in the global market environment or news from the political scene. 3M BRIBOR in the way up.
(CSOB - Investment research)