EUR/PLN Attacks 4.40, NBP Plays Down QT Talk

EUR/PLN is flirting with the 4.40 figure and last trades +40 pips at 4.3951 after testing the territory above that level amid continued pressure to the EMEA space. Our technical analyst flags Oct 17 low of 4.4096 as the next key bullish target, with bulls initially eyeing Jan 9 low of 4.3309. The latest gains for EUR/PLN coincide with yesterday's clearance of the psychological 4.00 figure by USD/PLN.

• Pekao circulated an analytical piece noting that the PLN's REER has been rising in the recent months, with the nominal exchange rate little changed and inflation staying high relative to trading partners; they expect this dynamic to continue for much of 2024. They argue that betting on nominal appreciation from the levels seen at the beginning of this year was a typical "crowded trade" and many factors supporting this strategy were already "mature".
• Core inflation fell across all measures tracked by the NBP, including the key ex-food & energy metric, which eased to +6.9% Y/Y. This was in line with expectations, but mBank warned that momentum remains high and may temporarily rise to +0.5%-0.6% M/M as the economy picks up. Pekao expect core CPI to "ease asymptotically towards +3.5% Y/Y" this year, while Millennium Bank don't expect it to return to the +2.5% Y/Y +/- 1pp target range.
• Latest communique from the NBP played down the potential for Quantitative Tightening (QT), an idea floated by MPC's Dabrowski last week. The central bank's spokesman said that there is no such discussion at the moment and any such decisions will be made by the Management Board rather than the MPC.
• POLGB curve has steepened, with yields last seen -3.2bp to +2.6bp, with Polish FRAs pulling back from weekly highs.