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AUSSIE BONDS

Futures Steeper Overnight

US TSYS

Monday's Richening Unwound

AUSSIE 10-YEAR TECHS

(U1) Needle Points North

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  • With Core CPI rising to 4% in May and Final CPI print coming in at 4.7%, both key measures of inflation are now standing significantly higher than the 3.5% NBP upper tolerance band.
  • While some policymakers continue to think that the spike in inflation is just temporary and that inflationary pressures should ease in the end of 2021 / beginning of 2022, some more 'hawkish' MPC members are favoring a 'symbolic' rate rise in the short term.
  • This week, 'dovish' MPC member Gatnar repeated on TV Biznes24 that a 'symbolic' rate rise is needed as it is still not clear if the polish spike is temporary. Gatnar sees CPI inflation at 5% in June and confirmed that polish fiscal expansion will 'simulate inflation'.
  • MPC member Hardy also commented on TOK FM that polish interest rates should be 'gently normalized' right now as CPI inflation may remain elevated for longer than expected if NBP does not act.
  • USDPLN has been retracing higher in the past week, breaking above its 3.77 resistance (100D and 200D SMA); next ST resistance to watch on the topside stand and 3.80, followed by 3.82. On the downside, first support stands at 3.74 (50D SMA), followed by 3.70.