The Slovak currency resumed its
strengthening trend on Friday. The unit
opened at EUR/SKK 36.45 and slightly
weakened in the morning. However, bulls
returned to the market later in the day and
the exchange rate closed the day near its all
time high at EUR/SKK 36.29. The Slovak
koruna may attack its historic highs this
week, as foreign banks are still interested in
purchasing the Slovak currency. Anyway,
the eco-calendar is thin in the first half of the
week.
Therefore the regional sentiment
should prevail as the key SKK driver. But in
the second part of the week, trading should
be driven by domestic indicators – industrial
output, wage growth, retail sales, foreign
trade and inflation statistics. Last week, NBS
slightly modified its inflation projection up for
2006 (4.1% from 3.9%) and down for 2007
(2.6% from 2.8%) leaving 2008 unchanged
at 2%. Stable or further declining oil prices
may help HICP to move closer to the 2007
target (2%). According to the central bank,
the strong SKK does not hurt the economy
so far. Therefore, if regional sentiment
remains SKK supportive and upcoming
economic statistics are in line with optimistic
projections, we should expect a further
march south towards the EUR/SKK 36.00
threshold.
(CSOB - Investment research)