The Czech economy contracted by 8.4% quarter-on-quarter, or 10.7% year-on-year, which is an unprecedented fall due to the Covid-19 outbreak. The flash 2Q print was, however, a bit better than the market expected, though some revision might come later

EU recovery fund and the EU budget is positive for the CEE region with the EU transfers into CEE in the 2021-27 period rising vs the prior budget. As the new EU wide funding means lower downside risks to the CEE key export market and higher odds of a synchronised EU recovery, this is clearly a positive for CEE FX. CZK remains our top pick and we look for lower PLN/HUF

The Czech economy improved slightly in May but still lags behind the pre-crisis level of economic activity. Despite a month-on-month increase of more than 10%, industrial production is about a quarter lower. Of the industries, the automotive industry is currently the worst performing. Unfortunately, the fall in new orders by almost 35% in May does not give much optimism to the future. Currently civil engineering, whose production increased 1.2%, cannot complain about demand. In building construction, on the other hand, production decreased 11%. Despite weak demand from the domestic and foreign economies, however, unemployment in the Czech Republic remains low for the time being, at 3.7% in June, according to the Ministry of Labour and Social Affairs. In our opinion, the main reason is the Antivirus programme.