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- Forward rates have been falling sharply in July following recent dovish comments from NBP policymakers; Glapinski once again confirmed earlier this morning that it would be 'unreasonable to hike rates now' as he sees risk of slower recovery.
- Yesterday, policymaker Eryk Lon wrote that November inflation forecasts will now be key for policy outlook, implying that the probability that the NBP will keep interest rates on hold until year-end has increased significantly.
- Hence, a quiet NBP could continue to weigh on PLN against major crosses and relative to HUF/CZK with traders chasing the monetary policy divergence narrative.
- In addition, the breakdown in relationship between Poland and EU (following Polish EU Law rejection) may put Warsaw's 23.9bn EUR of stimulus grants at risk, which could also lower growth expectations and therefore represents an idiosyncratic risk for PLN in the near to medium term.
- USDPLN has been trending in July and is currently testing its 3.90 resistance; next level to watch on the topside stands at 3.92, followed by 3.96. On the downside, first support to watch below 3.83 stands at 3.80 (100DMA).
The chart below shows that the pair recently broke above its LT downward trending resistance line.