Vladimír Urbánek (Kurzy.cz)
Markets  |  September 06, 2012 08:54:14

Morning comment 9.6 - Change WAT, Draghi / ECB

Key Events

·         CR: Wednesday morning trading statistics of retail sales with the crown had no effect. Retail sales in July, although increased slightly (0.3%), but only because of a higher number of working days. After the working day adjusted sales prices declined by 1.5%. The overall situation in retail does not improve. Vendors with a few exceptions, revenues are reduced, at best, stagnate. One exception is the sale of goods over the Internet and through mail-order services.

·         CR: also attracted the attention of the situation around the planned increase in VAT. After verbal intervention by President V. Klaus coalition against raising taxes can not be together right now 101 votes needed for approval of this Act. Given that the Prime Minister Necas wants to vote on VAT increase combined with the vote of confidence, we can assume that the 101 votes needed to finally find it. The VAT increase will need to MPs to vote again because it is very likely that President Klaus will use his veto and the law back to the Chamber of Deputies.In the long view, the failure to adopt the law on the VAT increase could threaten the Czech Republic's commitment to reduce the pace of the planned state budget deficit.

The development of the foreign exchange market

·         At yesterday's trading had a significant impact speculation that the president of the European Central Bank (ECB) on Thursday M. Draghi press conference announces launch unlimited ECB buying bonds. The common European currency after the publication of this report promptly strengthened against the dollar and support as well as risk assets, including Central European currencies.

·         Crown managed to strengthen against the euro and at the end of the trading took place underwater 24.80 CZK / EUR. Considerable gains have scored Czech currency in the currency pair with the dollar, where several quotes at the end of the day took place at the level of 19.60 CZK / USD (fresh highs).

·         Gains eventually scored the Polish zloty, which targeted after a morning trip to the surface 4.20 PLN / EUR at 4.18 PLN / EUR.

·         Good results were the common European currency, which reverted back to the surface $ 1.26 / EUR trading around this level took place in the end of the day.Today's ECB meeting, followed by a press conference, will have a key impact on major currency pairs, as well as the development of Central European currencies. If the ECB really accede to unlimited bond purchases can expect an immediate positive response - new highs against the dollar, the euro and perhaps the crown against the euro. Conversely, if market expectations are not met, we will see a jump depreciation of the euro with a potential negative impact on the Central European region.

Today's expected dates and events

·         CR: Fresh data from industry, construction and foreign trade in July.

·         Eurozone: ECB meeting and subsequent press conference (beginning at 14:30). Expected to reduce the key interest rate by 0.25% and the announcement of unlimited bond purchases by the ECB.

Miroslav Novak

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