Zloty Appreciates During NBP Presser Despite Clearer Rate-Cut Prospects

The zloty appreciated during Governor Adam Glapinski's comments, with the market digesting one of the most eventful press conferences in the past months. We see two-way implications of this presser, but the bottom line is that they support expectations of the easing cycle starting already this year (there will be more details in our forthcoming review).

• On the dovish side:
  • the Governor said that the MPC has ended its rate-hike cycle and is now in standby mode "but without its finger on the trigger," which sets the scene for interest-rate cuts
  • he confirmed that the MPC could deliver a 25bp cut already in September, if inflation eases to single-digit territory, while projection shows with much confidence that it will keep easing over the following quarters
• Slightly hawkish caveats:
• Glapinski played down current market bets for around 100bp worth of cuts by the year-end as definitely excessive, calling this pricing a "fantasy" in an unusually firm pushback
• The Governor described the NBP as a "conservative" central bank and said that cuts would likely be delivered in 25bp increments, while the MPC will seek to avoid surprising the market
• the current projection assumes that rates will stay unchanged over the monetary policy horizon - some participants may expect that cuts would delay the return to the inflation target, forcing the NBP to stop/reverse easing
• There has been an evident dovish impulse reverberating through Polish interest-rate markets, with the FRA curve shifting lower as Glapinski spoke (albeit yesterday's lows remain intact). POLGBs have reversed earlier gains, with 2s now 11.0bp shy of neutral levels.
• EUR/PLN remains on the back foot for now, last -204 pips at 4.4653, with the zloty keeping its status as today's EMEA front-runner (lagging only the rand). The pair has now fully erased yesterday's upswing, with the dovish remarks from Glapinski doing little to move the PLN.