Zloty Garners Some Strength Alongside Regional Peers

EUR/PLN continues to hover just above recent cyclical lows, last -109 pips at PLN4.4284, with the zloty outperforming all its EMEA peers save for the South African rand. The wider CE3 space is showing some strength, faring better than the euro as we type.

• From a technical standpoint, bears look for a breach of Jun 22 low of PLN4.4195, which would give them a green light for targeting the PLN4.4 figure. On the flip side, bulls keep an eye on the 20-EMA at PLN4.4611.
• Several local sell-side desks described the government's decision to extend VAT exemption for food items through the year-end as "fully expected." ING suggest that it will lower inflation by 1pp, while Santander and Pekao expect the expiry of the measure to boost inflation by 1pp and 0.75pp respectively. All have already accounted for these dynamics in their inflation forecasts.
• Government spokesman Piotr Muller said that the decision whether "mortgage holidays" will be extended will be made in 4Q2023 based on NBP interest rates.
• Poland's YtD budget deficit was PLN20.85bn in May, according to the latest update form the Finance Ministry. Budget performance was at 30.7% of the 2023 plan.