The Czech currency shrugged off both weaker-than-expected July’s foreign trade figures and firmed slightly. One reason behind koruna’s strengthening could be the fact that President finally appointed a new conservative (ODS-led) government. It I worth mentioning, however, that its unlikely the new minority government will win a confidence vote. Recall that three of five parliamentary parties have already indicated (the Social Democrats, Communists and Christian Democrats) that they will not support the ODS minority cabinet with unaffiliated experts, hence it is expected the confidence vote will fail. The voting is expected at the beginning of October.
Given the empty domestic and foreign calendar, the koruna will probably develop a sideways trading patter and the EUR/CZK pair should stay in a narrow range close to the 28.25 level.
(CSOB - Investment research)