Surprising NBP Rate Decision Rattles CE3 Markets

Polish central bank's jumbo-sized rate cut prompted a strong reaction in local markets, while reverberating across the wider CE3 region. When this is being typed, EUR/PLN sits at 4.5622 while POLGB curve has been exposed to a strong steepening impetus (yields last -17.6bp to +3.3bp).

• EUR/CZK rallied on the announcement of the NBP's rate decision, topping out at 24.358, its highest point since Dec 12, 2022. The pair has now trimmed gains and deals at 24.307. CZGB yields and local FRA contracts dipped in reaction to NBP headlines, before reducing those losses. Participants are looking for hints surrounding the timing of the CNB's rate-cut cycle, with Bank Board's Jan Prochazka noting that the matter could be discussed later this month.
• EUR/HUF extended gains, showing above the 390 figure at some point, before easing to 389.00. Local interest-rate markets were sensitive to the news from Poland, with HGB yields and Hungarian FRAs coming under pressure.
• The zloty is the worst regional performer. PLN/CZK dropped firmly through the 5.35-5.36 area which supported price action since mid-July, which results in the formation of a bearish technical structure. Losses were limited by the 100-DMA at 5.2122.
• PLN/HUF has a bearish outside day, last trading -1.00 at 85.26, with bears looking for further losses past 84.65.