PLN: Zloty Extends Losses Day After Core CPI Miss & FinMin Comments

EUR/PLN extends gains, approaching resistance from the 50-EMA/round figure at 4.2951/4.3000. Zloty weakness yesterday was likely amplified by the Finance Minister's comments re: impact of current PLN strength on exporters, and possibly by weaker-than-expected core CPI. The rate last deals +107 pips at 4.2953, with bulls keeping an eye on aforesaid resistance levels. Bears look for a pullback towards the 4.25 area.

• Discussing yesterday's sharp PLN sell-off, ING saw the move as corrective in nature, while Santander pointed to comments from the Finance Ministry. Pekao listed several factors: (1) a failed test of 4.25, (2) downside surprise in core CPI, (3) limited risk appetite, (4) holiday-thinned liquidity, (5) possible conversion of EU aid into PLN.
• Data yesterday showed that core inflation cooled more than expected to +3.6% Y/Y in June from +3.8% prior (consensus: +3.7%), but all other metrics of underlying inflation increased.
• On the dovish side, worth mentioning that NBP Board Member Pawel Szalamacha said that it seems that the full delayed impact of the increase in VAT on food staples materialised in June.
• Poland's consumer confidence worsened to -14.0 in July from -12 prior, printing below the -11.5 consensus forecast. Statistics Poland said that "the evaluation of the future financial situation of the household deteriorated the most."
• POLGB curve has bull flattened, with 2-year/10-year spread tightening further to 46.8bp. Yields last sit 4.0-6.5bp below neutral levels.
• The WIG20 Index continues to lose altitude after a 3.3% decline yesterday, shedding a further 1.4% from Tuesday's close. The index has now dipped through its 50-DMA and 100-DMA, printing its worst levels since mid-June.