KBC: The Czech koruna remains under pressure after CNB. Regional PMIs deteriorate further

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KBC: The Czech koruna remains under pressure after CNB. Regional PMIs deteriorate further

01.10.2012 10:49 Monday
The Czech koruna remains under pressure as CNB cut rates to record lows close to zero and said it may intervene against the currency, if it saw a need for even looser monetary policy.

Although there is clearly some opposition against any non-standard measures on the board, it is not as strong as we were afraid. We believe that the CNB might be provoked to intervene in the forex market if the koruna hits 24.00 EUR/CZK. For now we believe the Czech koruna can remain under moderate pressure thanks to the combination of dovish CNB, mounting political crisis and deteriorating macro outlook.

Last evidence of worsening macro-picture comes from regional PMIs. Czech figure fell to 48.00, which is the worst level since May and the headline is below the 50.00 threshold for the sixth month in row. New export orders - one of the key components of our Czech leading indicator - have now declined for 11 month in a row.

The picture from Poland does not look much better. The PMI fell to 47.00 - the lowest level since the summer 2009. The output sub-index - the best barometer of actual industrial output - is at 39-month lows. Putting it together with further weak Polish data and strong zloty it only reinforces our call for interest rate cut at this week´s meeting.

KBC

es



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