The Exchange rate roulette is going to start next week

Well – Czech national bank didn’t disappoint, it defended the reputation of its level of stubbornness competing with my pet bulldog. Even though there is probably no economist today in the Czech Republic who wouldn’t be from CNB and at the same time didn’t sign up for the statement that the interventions against the exchange rate of Czech crown are outdated and useless and should be ended as soon as possible, CNB after the negotiations of its bank board ended, once again stated that – by their vocabulary – “the exchange rate commitment of weak crown and setting of the interest rates on the current level are remaining”. In other words, CNB keeps fighting against the market pressure on the appreciation of the crown and is not letting the exchange rate go under 27 crowns for euro.

It means that the key moment for the Czech economy which is being looked forward in the financial waters with really giant suspense and by which almost three and half year period ends when the Czech economy simulated by basically fixed exchange rate as if the adoption of euro is being pushed to time in another six weeks so after another “big” meeting of the bank board?
Not by far. We are repeating again that the interventions belong among precautions which are not being announced in advance for strategic reasons. The bank board could freely agree today that it is going to agree on it soon. And if CNB committed keeping the exchange rate until the end of the first quarter then it agreed to keep it until midnight of today. And then there’s going to be the weekend. And then the fun can freely begin. Or it doesn’t have to. Literally, the everyday roulette is going to get started since Monday’s morning. Then every day can bring the moment that is being talked about even by old ladies cooking lunches in a school cafeteria. (Without overreacting. 8 the least-likely people asked me about the exchange rate yesterday, people that I was surprised only by hearing the word “exchange rate” coming from their mouths.)

Despite that, we have at our disposal certain key which is clearing up this roulette a little bit. Governor Jiří Rusnok stated on the press conference at the end of the meeting of the bank board: “Starting next month it is possible to leave the exchange rate commitment on any of the meeting of the bank board. We are going to announce the decision immediately so within ten of minutes.” Aha, so the end of the interventions should happen after one of the other meetings of the bank board takes place. Although, they do have “big” meetings once in six months (that is rather falling at the beginning of May) but “small” meetings are happening every Thursday. And next to that bank board can arrange called meeting anytime. Therefore Thursdays are the first in the line of suspects for the jump of the exchange rate.

And then we have one more certainty. Rusnok was talking about “announcing immediately” after the decision. Aha. So the decision is going to be announced. Not that CNB would be playing a dead bug and let the financial market to notice it on its own. That is for the analysts more fun but for the speculators, small savers and companies heart attack inducing and for CNB the more complicated variant. It is guaranteeing that the jump of the exchange rate is going to be bigger than it would have been if CNB took the more diplomatic route instead. Well, that way the gentlemen from the bank board are making this more adrenaline inducing for both them and us.