The South African current account deficit in Q2 narrowed more than expected to 3.2% of GDP, an improvement from the Q1 deficit of 7.0%, as a sharp decline in imports on the back of the economic downturn improved the trade balance and consequently narrowed the current account deficit.
Political uncertainty over early Czech elections continues. It is increasingly likely that the early election as initially planned for October 9-10 will have to be postponed. Yesterday afternoon, the prime minister of the caretaker government Jan Fischer said that a delay of the elections raises the risk that the Czech Republic would have to start 2010 with a provisional budget.
Preview
Very light calendar in terms of economic data today. Russian inflation for August might be published today. Lithuanian unemployment for Q2 should climb further.
Trading update
It seems that the Chinese stock market has taken over as the main market mover for EMEA FX these days. If the Asian, especially Chinese, stock market rises overnight, this should boost EMEA FX. That was once again the story on Thursday morning, when all EMEA currencies started the session in positive territory after the Chinese stock market rose 3.5% overnight. Although the current account deficit in South Africa narrowed more than expected, the ZAR reaction was fairly limited. The market also seems to be ignoring the recent political turmoil in the Czech Republic, with the CZK continuing to track risk sentiment.
Yesterday, in an interview for Reuters, the Polish central banker Jan Czekaj said that the economic situation is better than the central bank thought. He furthermore said that the zloty appreciation is too quick and could harm the recovery. He also said that the Polish central bank is considering changing its policy bias.
A pretty light calendar today means that EMEA markets will be driven by risk sentiment present in financial markets. But the CZK could start underperforming some of its CEE peers, for instance PLN, if the Czech political turmoil persists, given Poland’s stable political environment and much healthier economy.
