Investiční bankovnictví (Komerční banka)
Currencies  |  October 19, 2012 16:01:00

Central European economies face monetary easing

The past week has been successful for the Czech currency. It was confirmed that after several unsuccessful attempts to break the levels of 25.00 CZK / EUR, the market chose time out. Crown for the majority of the week strengthening of quotations at 25.00 at the beginning of the week to Thursday 24.70 CZK / EUR. In the end of the week, nothing major happened in the foreign exchange market, the exchange rate is carefully pushed the slightly above 24.80 CZK / EUR.

Crown to home week hurt a significantly worse balance of payments in August. The current account showed an unexpectedly profound deficit of CZK 26.6 billion when the market consensus points to 20.6 billion CZK. The trade balance reached a surplus of CZK 4 billion, the most surprises so concentrated in the income balance. The deficit in August reached CZK 34.3 billion, significantly below our expectations. Outflow of dividends abroad amounted to CZK 21.3 billion.Services balance recorded a surplus of CZK 3.4 billion, while current transfers resulted in a nearly balanced (CZK 0.3 billion). The financial account surplus contracted in August 26.5 billion CZK. Despite the disappointment, however, data confirmed that the Czech economy does not have a problem with external imbalances.

Czech currency was the currency most successful region in the whole week when ratings improved by roughly three quarters percent. Gains Hungarian forint did not reach even half a percent, even Polish zloty weakened slightly. Although global markets have faced most of the week, optimism and the euro against the dollar attacked monthly maximum, the Central currencies it was not too noticeable. Deteriorating macroeconomic picture in combination with the forthcoming meetings of Central European central bank raises fears of easing of monetary policy, making the investor's point of view exchange less interesting.

The upcoming meeting of the CNB Bank Board will limit the scope for strengthening. Next week from home no new economic indicator will fail. In order to discuss monetary policy on the basis of a new macroeconomic forecasts CNB Bank Board meets the first November. With the gradual approach of this event will limit the scope for strengthening of the crown, or expect increasing pressures on its weakening and the possibility of re-testing the level of 25.00 CZK / EUR. Governor Singer this week reiterated that in the current situation of near-zero interest rates is a tool for further easing of monetary policy, exchange rate. However, as an acute risk of direct foreign exchange interventions perceive. The Board has not yet decided about them.In our view, the central bankers have approached them in the event of a significant strengthening of the crown (probably in September, significantly below the annual maximum achieved 24.40 EUR / CZK) accompanied by signs of a deepening recession in the domestic economy is reflected in the rising expectations of deflationary tendencies.

Author: Jan Vejmělek

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