Vladimír Urbánek (Kurzy.cz)
Markets  |  April 22, 2013 13:16:08

Weaker macro data from Europe this week could limit the growth potential of the crown

Foreign exchange markets experienced increased volatility during the week, but not to the extent as the price of gold, which showed the largest one-day decline for the last 30 years. Gold prices in the international markets experienced weakened due to the ˇ expectations that Cyprus will sell some of its gold reserves in order to apply for financial aid.

That among investors ° sparked fears that Spain and Italy could follow, leading to a sharp fall in prices of the yellow metal. This development resulted in a sale of commodity currencies as the Australian dollar and South African rand. The adverse investor sentiment ° also contributed to Monday's macroeconomic data from China that showed a slowdown in the Chinese economy to 7.7% from initial estimates at 8%. The increase in risk aversion among others occurred after the bombings during a marathon in Boston that claimed three lives.This act of terrorism is still very intensively investigated by relevant departments of the FBI. The increased activity in the foreign exchange markets also contributed to volatility in the equity markets. Weak revenue outlook ° Bank of America started the sale of shares, which resulted in an increased interest of investors ° a safe haven as the U.S. dollar, thus reversing the negative trend of the previous week. IMF lowered growth outlook for the global economy from 3.5% to 3.3%, but also mentioned that the main risks of further economic development to some extent fell.Euro in the second half of the week registered losses after the head of the German Bundesbank and ECB member Weidmann said that the resolution of the ongoing eurozone debt crisis could take a decade and the central bank should be prepared to further cut interest rates, should the economic situation required. Traders are also awaiting the outcome of the G20, IMF and World Bank, held on the weekend. Investors expected a similar communiqué as has already been said in the past, when states warned against competitive devaluation of currencies and excessive volatility in currency markets. The biggest loser of the week became the Swedish krona, which has weakened against the euro to 2-ME ˇ month ˇthe minimum after the Riksbank lowered its long-term monetary policy outlook.

The crown was during the week against the euro due to the absence of a major inspiration of the domestic market and risk events trapped in a very narrow fluctuation margins. A positive factor as it was only that Czech currency experienced major losses when the mid-week in major markets increased investor aversion to risk °. Slightly negative response was recorded together with the publication of the German ZEW index of investor sentiment, which came out a better balance of current account data and weak inflation data.Current account balance recorded a surprising rise to 27.7 billion crowns and compensate for the lower PPI.

This week the Czech economy will not be published any new indicators, and therefore the future development of the crown largely dependent on developments in major markets and the overall investor sentiment °. Weaker macro data from Europe could limit the growth potential of the crown.

David Klatovský, an analyst at Western Union Business Solutions Czech Republic

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