Investiční bankovnictví (Komerční banka)
Currencies  |  November 09, 2012 16:20:00

Crown weakest since the end of July


Czech koruna continued this week in its weakening trend when she lost more than a percentage. Similarly, developed a course forint. Most notably weakened the Polish zloty (by more than 1.5%). All CE currencies suffered from the deteriorating condition of the euro area economy and weakening the euro and the U.S. dollar market. The weakening of the zloty then supported the reduction of interest rates by the Central Bank Governor Belka and commentary. He said Wednesday's decision is only the beginning of the cycle cut rates.

Weaker Czech currency, reflecting weaker macroeconomic indicators and central bank actions. The weakening trend of the crown ranges from mid-October, when the exchange rate was attacking 24.70 CZK / EUR.In the second half of this week has already been tested level of 25.50 CZK / EUR, although the very end of the week brought a slight correction and displacement rate just below 25.40 CZK / EUR. In less than a month, the crown lost about three percent of its value. In November, the historical cost and losses decisions central bank cut its key interest rate at essentially zero. This is also the monetary policy instrument exhausted and what can ease the monetary conditions if necessary, a weaker currency. And this need is obvious, which was confirmed in this week published macroeconomic data.

Domestic demand continues to be forfeited, begins to fade and the foreign. September retail sales disappointed decline of 3.3% y / y. Even when the number was less affected by the number of working days, it is clear that domestic demand is weak. No wonder.Since the spring we have on a seasonally adjusted basis witnessing the deterioration in the labor market in the form of declining employment. The October unemployment rate (seasonally adjusted) rose slightly in September from 8.4% to 8.5%, but the market allowed for stagnation. The labor market is of course signed the worsening situation in the Czech industry. This sector has been in the post-crisis period is basically the only ones who create jobs. September's data, however, is clear - employment in industry was up by 0.8% down to 0.3% was lower yoy average wage. Performance of the Czech industrial production falls hand in hand with falling orders in the German industry. According to the September statistics Czech industry fell by 7.1% y / y, which represents the worst result since the crisis of 2009.The weakening external demand data clearly showed September foreign trade - exports was higher by at least 0.6% y / y. Imports, however, dropped by a significant 3.3% due to weak domestic economic activity. The result was thus for September recorded a higher-than-expected surplus of 31.6 billion CZK. Weak domestic demand is evident in the evolution of inflation. Although the October data surprised slightly higher price dynamics, adjusted inflation is still at zero. Headline inflation in October was flat at 3.4% in September y / y.

The exchange rate will increasingly decide domestic macroeconomic data with how the exchange rate became monetary policy instrument. After more sensitive to negative information reflected crown earlier this week. For the upcoming week will be key data fast GDP estimate for Q3 12thWe expect quarterly stagnation (decline in annual terms by 1.0% y / y) and we are slightly more optimistic than the median market. Market consensus is located at -0.1% q / q. More important, however, is still optimistic that the prognosis central bank estimated 0.2% q / q. It is the view of the important players in the market benchmark. If the result fails, the CNB's view it will be a major inflationary factor indicating the scope for monetary policy easing. The only possible channel would be weaker. From a technical point of view, however, will not be easy to overcome technical resistance around 25.50 CZK / EUR.

Author: Jan Vejmělek

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