Weak GDP Outturn Weighed Against CNB Rhetoric

EUR/CZK changes hands +0.013 at CZK23.694 as the market assesses CNB rate trajectory in the light of more detailed Q1 GDP data released out of Czechia. Bulls look for a break above May 19/Mar 28 highs of CZK23.797/23.820, while bears keep an eye on May 9 low of CZK23.340.

• Czechia's GDP shrank by 0.4% Y/Y in Q1, according to the refined estimate from the CZSO, with the central bank set to comment on the data at 12:00BST/13:00CEST. The data has seemingly inspired some dovish CNB repricing, with the local FRA curve and CZGB yields moving lower after the release of the data. Komercni Banka said that they expect the economy to grow by 0.6% Y/Y this year, with the risks tilted to the downside after weak leading indicators from last week.
• Meanwhile, Ceska Sporitelna said that the data "are rather anti-inflationary and should act in the direction of the need for stable rates," although "a possible increase in rates at the June meeting cannot be ruled out given the change in mood within the CNB." Furthermore, CSOB wrote in their morning note that "further hawkish statements by members of the CNB Bank Board could support the Czech currency" this week. Over the weekend, Tomas Holub called for a rate hike which in his opinion would have a significant signalling effect.