Koruna posts largest gains since February
Retail sales and unemployment weigh on zloty
On Friday, the Czech koruna posted the largest gains since early February. Far better than expected German Ifo index for May triggered the gains. The koruna breached below the EUR/CZK 26.00 level easily and closed at EUR/CZK 25.90. We think, however, that koruna’s gains were overdone and the exchange rate will be prone to corrections. Let us recall that the Czech National Bank (CNB) still ponders selling the domestic currency and surprisingly severe contraction of the Czech economy in the first quarter of this year further strengthens the case for (at least verbal) interventions. Regarding the forint and the zloty, the former also strengthened on Friday while the latter closed barely changed, as a better Ifo in Germany was overshadowed by surprisingly weaker retail sales and higher unemployment rate in Poland.
Click here to read the full report: FX Daily
KBC