Zloty Extends Gains, Building On Yesterday's Strength

EUR/PLN remains heavy after a sharp sell-off yesterday and last changes hands -41 pips at PLN4.4967. From a technical viewpoint, a dip through May 17 low of PLN4.4784 would bring Jun 7, 2021 low of PLN4.4360. Conversely, bulls look for a rebound above the 20-EMA, which kicks in at PLN4.5467.

• We had another round of Polish macroeconomic data this morning. Real retail sales shrank 7.3% Y/Y in April versus -8.1% expected, while construction output rose 1.2% Y/Y versus +1.9% expected. There has been little in the way of material reaction in Polish markets.
• Polish central bankers continued to comment on the government's fiscal proposals. Henryk Wnorowski, the most hawkish dove in the MPC, yesterday said that they could extend the NBP's "wait-and-see" approach. This morning, Governor Glapinski cited output from the central bank's main forecasting model, showing that the proposed stimulus measures would only have a limited impact on inflation.
• ING wrote this morning that demand for the zloty appears to be weakening past the PLN4.50 figure, which may be a "natural barrier" for PLN appreciation this year. They add that the zloty is no longer undervalued, while the prospect of an imminent CJEU verdict on CHF mortgages and more fiscal announcements may start to worry some investors.
• POLGBs have softened, with yields sitting above the psychological 6% level across much of the steepened curve. The WIG20 Index continues to creep higher, refreshing cyclical highs.