The EUR/CZK surprisingly ignored turnovers on the political scene and the EUR/CZK continued to trade sideways in a tight range close to the 28.20 level on Friday. What’s new on the political front? Since party’s members of the KDU-ČSL (the Christian Democrats) rejected the attempt of their leader to form a minority government with Social Democrats backed by the Communists, it is still on conservative leader of the ODS Topolanek to form a government. He is considering three possibilities: an interim government of all non-Communist parties; an ODS minority cabinet with some independent experts; or a technocratic government. He said all steps
for forming a democratic government has been taken, leaving only early elections.
Topolanek also said that such a cabinet should no make any strategic decisions, such as setting a date for adopting the euro This is not surprising for us as we have always said that time is passing very quickly to make the official target for euro entry (2010) feasible. As concerns early elections in our view it is a realistic choice, but it is far from clear when they would be held.
Today, however, it will not be the domestic politics, which will drive the market. The market will focus on the Hungarian FX market, because NBH will probably change its base rate. So the forint should lead the lead the region including the koruna.
(CSOB - Investment research)