Investiční bankovnictví (Komerční banka)
Currencies  |  November 02, 2012 18:52:00

CNB cut rates, the crown fell to a three-month low

Crown during the previous week against the euro, wrote about one and a quarter percent. Exchange rate of the Czech currency has shifted from levels around 24.90 CZK / EUR to 25.25 CZK / EUR during Friday evening. Crown and fell to the weakest level in the last three months. The most important driving force for the course was the meeting of the central bank to trade but also reflected the weakening of the euro against the dollar. Macroeconomic data from the euro area has shown to further slowing European economy, which is beginning to spread into Germany. On the other side of the Atlantic have shown improvement in macroeconomic indicators on the state of the economy just before the U.S. presidential election. The koruna is to surf with a depreciating euro against the dollar.

Czech National Bank in line with our expectations, cut its key repo rate. The decline in rates, however, was more pronounced than we expected, when the Board determined by a vote of 5-2 new level of the repo rate to 0.05%. Reduced to the same value as the bank discount rate of 0.10%, the Lombard rate decreased by 50 bps to 0.25%. Rates are zero and the technical, as the governor said Singer. If the central bank will want to further ease monetary conditions (as suggested by new forecast CNB) must proceed to influence the exchange rate. The foreign exchange interventions, the Governor did not want to comment too much, but the central bank announced that it will stop the program proceeds from the sale of its foreign exchange reserves, which could slightly reduce the appreciation trend, a great influence of this measure, however, can not be expected. More importantly, however, is that this indicates a further shift to bank interventions.Their execution is difficult to estimate, if only because the central bank will probably try to surprise markets. An important event for the further development of the publication of the preliminary GDP estimate for the third quarter of the 15th November. Meanwhile, markets will be interested in the minutes of the Board meeting, which the CNB published on Friday.

PMI leading indicator for the Czech economy fell in October, roughly in line with our expectations to 47.2 points from 48 points in September. The reason was primarily a reduction in new orders in the manufacturing sector declined and employment and total output. The overall picture of the PMI indicator is so very negative and portends ongoing economic problems in the coming months.

The state budget ended in October deficit CZK 51.3 billion, representing an annual improvement of 40.2 billion CZK. In September this year, while the deficit was 71.4 billion CZK. October's loss but significantly influenced the one-time effects, such as transfer of funds from privatization account (which derive dividends CEZ) in the budget and restore the payment of money from EU funds. Despite the resumption of payments from the EU but still there under the Ministry increased this deficit due to time mismatch of income and expenditure. There is still also effectively suspended the payment of CZK 11.2 billion in two problem projects.

On Tuesday, we published our new quarterly report with the updated macroeconomic forecast. Compared to the previous outlook of the end of July we reduced our estimate of growth of the Czech economy for this and next year by 0.3 percentage points. This year, as the Czech economy to decline by 0.8% in 2013, we expect modest growth of 0.3%. The entire quarterly report can be found on our website

Author: Marek Dřímal

Tyto zprávy pro vás vytváří Investiční bankovnictví KB.
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