Investiční bankovnictví (Komerční banka)
Commodities  |  September 21, 2012 16:18:00

Crown at the end of the week halt debilitating trend

After a whole week in the weakening of the krone strengthened its conclusion. In Friday's appreciation of about 0.7% was mainly due to improved sentiment in European markets in the context of the ongoing discussions between the European leaders in preparation for the rescue plan for Spain. While the first morning quotes were on the level of supervision 25.00 CZK / EUR in the afternoon she was under pressure level of 24.80 CZK / EUR.

Even this did not change anything to reinforce the fact that the Czech koruna ended last week with a loss of about 1.6%, which meant second worst result among Central European currencies. Worse was doing it just the Polish zloty, the Polish central bank as a much greater scope for easing monetary policy. While the key NBP rate is at 4.75%, its Czech counterpart is 0.50%.Money market and the prices of their instruments is calculated by reducing the Polish rates by 100 bps in the Czech prices are calculated with 35 bb.

And meeting the CNB's monetary policy will be a key domestic events next week. Market analysts also foresee the possibility that the two-week repo rate will be reduced by 25bp to 0.25%, with the central bankers makes clear his views on the future use less conventional instruments of monetary policy. However it must be noted that the reduction in interest rates is not a done deal, as it seems at first glance may seem.

A comparison of the current CNB forecast and last month released economic indicators that accumulate in essence, only downside risks that lower interest rates justify. GDP data for Q2, which declined qoq by 0.2%, the central bank were very disappointing.CNB is expected that the domestic product increased by 0.6%. Like the overall GDP failed central bank and household consumption. She had fallen in the second quarter of this year by 1.1% q / q (in Q1 it was 1.8%). Looking at the August inflation we see that was only slightly below the predictions of the CNB. Deviation was due to lower growth in food prices and inflation adjusted. This is the best indicator of demand pressures in the economy. Another inflationary factor is the development of the Czech crown against the euro in the third quarter when the crown was compared with the CNB forecast by nearly 2% stronger. Overall, the domestic anti-inflation environment acts. On the other hand, non-standard measures announced by the ECB and the U.S. central bank (the ECB and the OMT from a third round of quantitative easing, the Fed) was adopted markets very favorably.Thus, external development should mitigate the impact of anti-inflation factors from the domestic economy. Finally, household budget constraints for 2013 might not be so restrictive as previously thought, as increases in VAT rates loses support in parliament.

Regarding the debate on future action to support the economy, account number are several. As stated by Governor M. Singer told MF Dnes, for the case (1) attempt to compress the long end of the yield curve, (2) purchase of other asset classes, (3) extension of collateral accepted by the central bank of the other assets, (4) a commitment that the central bank will keep its key rate at very low levels for a long period, or (5) a weaker currency.In our opinion, the most effective way possible further easing of monetary conditions precisely measures aimed at weakening of the Czech koruna, which does not necessarily direct foreign exchange interventions.

The upcoming meeting of the CNB and the risk increases easing of monetary conditions, in our opinion, the likelihood of further weakening of the crown at least for the first half of the week. The first challenge is the psychological level of 25.00 CZK / EUR. In the case of negotiation would open space to 200 daily average slipping to 25.15.

Author: Jan Vejmělek

Tyto zprávy pro vás vytváří Investiční bankovnictví KB.
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