PLN: Zloty Takes Hit From Weak EZ PMIs, Disappointing Domestic Data

EUR/PLN posted a leg higher on the back of disappointing EZ PMI data, which coincided with the release of the underwhelming second batch of economic activity data out of Poland. The pair has now pulled back from session highs (4.2819) and last deals +62 pips at 4.2768. Bulls look for gains past Aug 28/Sep 12 highs of 4.3039/43. Conversely, bearish focus falls on Aug 16 low of 4.2614.

• Weak PMI outturns out of Germany are dovish from the NBP's perspective, with Governor Glapinski repeatedly flagging the risks posed by softer external demand to the Polish economy. Meanwhile, Polish retail sales rose slower than expected in August amid a continued decline in construction output.
• NBP's Ludwik Kotecki suggested that the MPC could discus cutting rates in March. In his view, the cost of reconstruction after recent floods should be less than 1% of GDP, which will not significantly affect the broader macroeconomic situation. He noted that if core inflation stays below +4% Y/Y this year, headline could start approaching the target from July 2025.
• Finance Minister Andrzej Domanski signalled that the government might revise the 2024 budget to deal with the damage inflicted by flooding. Relevant decisions will be made within the next two weeks.
• POLGB yields last sit 2.2-3.9bp lower across the slightly flattened curve. The WIG20 Index trades 0.7% lower on the session.