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PLN Weakens As NBP 'Disappoints' Market

POLAND
  • The NBP decided to raise its benchmark rate by 75bps to 3.5% to continue its 'fight' against inflation.
  • Even though consensus was expecting a 50bps hike, a lot of the analysts' projections were made 1 week ago and therefore did not take into account the recent PLN moves.
  • Even though a 75bps hike has historically been perceived as significant, it is still 'light' considering recent zloty depreciation.
  • FRAs were pricing in at least a 100bps hike with the 1Mx4M trading over 100bps above the Wibor 3M in recent days.
  • At the same time, policymakers run the risk of accelerating the economic slowdown by hiking too aggressively.
  • Market was slightly 'disappointed' by today's decision, with EURPLN rising above 4.92 up from 4.88 before the meeting.
  • Key resistance to watch on the topside remains at 5 (all-time high), which was rejected several times since yesterday.

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