Koruna On Back Foot As CNB Dep Gov Says Fiscal Austerity Measures May Entail Lower Rates

EUR/CZK pops higher as wires have carried comments from CNB Deputy Governor Eva Zamrazilova, who told a local radio station that the government's fiscal consolidation plan is a reason for the central bank to refrain from further rate hikes.

• Zamrazilova said that the austerity package will have a "neutral impact, or maybe just slightly anti-inflationary" at the monetary policy horizon around late 2024 and "in the following years, it might be a reason to keep interest rates lower than where they would be without the fiscal package."
• This comes after the central bank confirmed that the Q1 GDP outturn slightly missed its projections amid deeper than expected contraction in household consumption and fixed investment, even as exports and government consumption rose more than forecast.
• CZGBs remain firmer across the curve, with 10s outperforming as we type. The local FRA curve has shifted lower.
• The pair last deals +0.055 at CZK23.736, with bulls still looking for a break above May 19/Mar 28 highs of CZK23.797/23.820.