Zloty Declines, Market Clings To Belief That Rate Cuts Could Come This Year

The PLN trades on a slightly softer footing, with parliament set to resume work on the crucial court bill, while participants assess the latest comments from central bank officials. EUR/PLN deals at PLN4.6961, up 92 pips on the session, with familiar technical levels still in play.

• MPC member Gabriela Maslowska said that the central bank is unlikely to raise interest rates further, even as the rate-hike cycle has not been formally ended, adding that the timing of monetary easing is hard to determine. Ludwik Kotecki also said that more rate hikes are unlikely, but noted that there is no room for rate cuts this year and discussing monetary easing at this stage would be a "communication error."
• The market is bracing for rate cuts as soon as this year. When this is being typed, FRA 12x15 trades at a ~121bp discount to benchmark 3-Month WIBOR, the most popular reference rate for mortgages. Hopes for early loosening were fanned by last week's presser with NBP Governor Glapinski, who said that he was hoping that rate cuts would be possible near the year-end.