EUR/PLN Breaches Near-Term Support As CE3 Currencies Outperform

Strong Zloty appreciation has taken EUR/PLN through key support from Feb 2 low of PLN4.6787 and the rate now sits at PLN4.6707, down 340 pips on the session. Today's aggressive sales have allowed it to fully unwind YtD gains and move into negative territory, even as familiar headwinds to the PLN have not dissipated.

• There have been no signs of change to the NBP's relatively dovish stance on monetary policy and FX matters, which sets Poland's central bank apart from regional peers. The NBP is not expected to raise interest rates further, while its communications suggested that policymakers are comfortable with FX fluctuations.
• The Zloty's appreciation falls in line with regional trend today, with CE3 currencies (HUF, PLN, CZK) sitting atop the EMEA pile. Strong PMI data from China boosted confidence in EM currencies amid hopes for better global demand conditions.
• POLGBs have regained poise and fully erased earlier losses to last trade 0.3-5.2bp richer across the curve. The WIG20 index operates ~0.2% higher at typing.
• From a technical viewpoint, the next target for EUR/PLN bears is Jan 4 low of PLN4.6573, followed by Dec 26/Jun 21 lows of PLN4.6270/62.