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CPI Inflation Hits A 20Y High

  • Polish CPI inflation came in higher than expected in October, reaching a 20Y high at 6.8% YoY (vs. 6.4% exp.), up from 5.9% the previous month.
  • The chart below shows that inflation in Poland has diverged significantly from the NBP 3.5% upper tolerance band.
  • PLN strengthening following CPI positive surprise as market is starting to price in a potential NBP reaction next week (Nov 3).
  • Consensus is currently expecting the NBP to maintain its policy rate on hold at 0.5%, but another hike is very likely given the elevated inflationary pressures.
  • With the FRA 3Mx6M currently trading over 100bps 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.
  • EURPLN ticks lower following the CPI print, gradually approaching the low of its 3-day range at 4.61; next support to watch on the downside stands at 4.60.
  • Selling Pressure on the long end of the curve remains elevated with the 10Y yield approaching the 2.9% resistance; next key level to watch on the topside stands at 3%.

Source: Bloomberg/MNI

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