Sell-Side Desks See Little Potential For Imminent Breach Of Nearby Support Levels By EUR/PLN

EUR/PLN fluctuates around unchanged levels, close to a five-week trough touched earlier today, last changing hands at 4.2600. Familiar technical support formed Apr 9 low/round figure of 4.2527/00 draws attention, while bulls hope for a rebound above the 50-EMA at 4.3065. When this is being typed, POLGBs are 1.7-3.1bp firmer across the curve, while the WIG20 Index is advancing towards cyclical highs.

• The release of in-line US CPI data yesterday was a boon for EM FX as it cemented expectations of Fed rate cuts this year. However, it is worth noting that MPC members (most recently Adam Glapinski and Ludwik Kotecki - importantly, they are associated with opposing camps within the panel) flagged the NBP's relatively limited sensitivity to interest-rate action by core central banks. They noted that any such moves would not automatically trigger a reaction by the NBP, as domestic concerns prevail.
• ING suggest that EUR/PLN may stabilise in hte short term but appreciation may resume at the turn of the quarter, with the pair expected to reach around 4.20 on strong fundamentals and the expected partial conversion of EU aid. They still think that the rate may rebound to 4.30 after the US presidential election. Santander agree that the potential for further PLN strengthening has narrowed and we can see a correction before renewed longer-term appreciation. Meanwhile, both Pekao and Millennium write that the zloty may need fresh catalysts to breach nearby support levels, with the latter team noting that there is little in the way of such potential drivers in today's economic calendar.
• The NBP will release core CPI data for April today, but there is little potential for market-moving surprises, as most desks are able to accurately predict these figures based on final CPI data released beforehand.