Polish Gov't Bond Yields Slide, Zloty Is Firmer After CPI Miss

EUR/PLN clawed back its initial losses in the lead-up to the release of Poland's flash CPI readings, which confirmed a slowdown in headline inflation this month. However, the upleg in the cross seemed driven by broader EUR purchases, with EUR/USD climbing in sympathy. The subsequent pullback in EUR/PLN towards neutral levels was out of sync with EUR/USD price action, with the latter pair staying near session highs.

• EUR/PLN last deals at PLN4.6738, down 26 pips on the day. Following a break of trendline support and Nov 8 low, bearish focus turns to Aug 15 low of PLN4.6528. Conversely, bulls look for a rebound above trendline support-turned-resistance at PLN4.6848, before targeting Nov 22 high of PLN4.7177.
• Headline inflation in Poland decelerated to +17.4% Y/Y this month from +17.9% recorded in October. This represents a miss versus the +18.0% Bloomberg consensus and the first slowdown since February. Per mBank calculations, core inflation quickened from +11.0% Y/Y to the "+11.3%-11.4% region."
• Final Q3 GDP figures were released alongside the inflation report. Annual growth was revised higher to +3.6% from +3.5%. Driving the deceleration in GDP expansion last quarter were signs of cooling in domestic demand, evidenced by notable declines in private consumption and investment.
• Poland's government bond yields tumbled after the release of CPI figures, which are expected to cement the case for continued rate-hike pause at the NBP. At typing, yields sit 15.6-17.4bp lower across the curve, with benchmark 10-year yield hitting new two-month lows at 6.54%.