The Slovak FX market kept its bullish
sentiment on Tuesday. EUR/SKK
appreciated slightly and went through the
psychological 37.0 threshold with SKK
testing all time highs.
The reason for SKK strengthening was the
leakage of the budget draft for 2007. The
budget draft meets the Maastricht criterion
for 2007 to maintain a deficit under 3 percent
of GDP, contrary to what might have been
expected after the Smer pre-election
promises in delivering the welfare state.
Now, the inflation criterion is in the spotlight
and falling commodity prices raises chances
for achieving the Maastricht inflation limit
(due to higher sensitivity of Slovak HICP to
moves of these prices. We look out for more
details of the budget draft later today. The
expected data (CPI and foreign trade) could
have smaller impact on the market if they
stay within the forecasted range.
EUR/SKK testing all-time SKK highs on
positive EMU convergence news.
(CSOB - Investment research)