The Czech koruna stayed under pressure
on Wednesday and hovered just below
EUR/CZK 28.40 during most of the session.
It more or less ignored the news that one
Social Democrat MP quit the party, which
significantly weakened the chances of the
leftist parties to form a government. Also the
final decision of the Government to walk out
on entering the ERM – 2 mechanisms in
2007 was widely expected. After all, the
attention shifted to the losses of the Polish
currency, which prevented the koruna from
trimming larger part of the previous session’s
Today, the Czech koruna might gain in the
morning as the positive impact of a
(moderately) dovish Fed could improve the
overall sentiment on emerging markets.
Nevertheless later in the session the
attention of the markets should shift towards
the CNB’s rate-setting meeting. We expect
the Central bank to hold rates unchanged.
Hence the sentiment on the Czech FX
market could deteriorate in the afternoon.
ČSOB Investment Research