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Reporting on key macro data at the time of release.
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- Market participants are preparing for Poland October CPI inflation coming out tomorrow (Oct 29, 9am London time), expected to accelerate to 6.4% YoY (far above the 3.5% NBP upper tolerance band).
- Tomorrow's print may also impact other CEE assets (i.e. Hungary, Czech Republic); rising inflationary pressures have been a concern for all the CEE region, and central banks have not hesitated to surprise the market by hiking more aggressively.
- Interestingly, while higher than expected inflation prints have generally resulted in a depreciation in the domestic currency, a positive surprise in inflation tomorrow could result in PLN strength with market pricing in a potential NBP reaction next week.
- The market is currently expecting the NBP to maintain its policy rate steady at 0.5% on November 3rd, following the 'aggressive' 40bps hike last month.
- With the FRA 3Mx6M currently trading 105bps above the Wibor 3M, the futures rate market is currently pricing in the NBP policy rate to be at 1.5% by the end of January 2022.
- On the other hand, a negative surprise (CPI inflation coming in lower than expected) could lead to further PLN depreciation, as the NBP will likely remain on hold next week.
- Key resistance to watch on USDPLN stands at 4.0160; a break above that level would open the door for a move up to 4.0580 (May 2020 highs).