The Czech currency tracked profit-taking
seen in the Hungarian Forex market ignoring
the fact that an agreement between the main
two political parties (conservative ODS and
Social Democrats - CSSD) has been finally
on the table.
The ODS has been assuring
the public for three month that it would not to
form a grand coalition with the CSSD. Now it
looks that a light form of the grand collation
will be really formed. In our view such a
political situation should be neutral for
the CZK in the short and medium term
horizon. In long run, there is a risk that
minority government (probably with a timelimited
mandate) will not be able to push
through any structural measures, which
might hurt the growth potential of the Czech
economy.
Today, however, the focus should be on
macro data released in German (IFO) and
the US (New home sales). We believe that
(in sum) the impact of the data should be
neutral for koruna, since the statistics should
confirm the cycle peaked in Germany, while
the US growth might slow further. However,
these negatives are offset by reduced rate
expectations.
(CSOB - Investment research)