Zloty Looks Through Domestic Inflation Data

The zloty has been unfazed by the release of preliminary CPI data for April, which showed an expected rebound in headline inflation rate to +2.4% Y/Y from +2.0% recorded in March. The key figure came in marginally below the consensus forecast (+2.5%) and remains within the NBP's +/-1pp tolerance band around the +2.5% target but is widely seen rising in the coming months. Inflation in April was boosted by the re-introduction of a 5% VAT rate on food, with question marks surrounding the extent and timing of the pass-through to the prices paid by consumers.

• EUR/PLN last deals +57 pips at 4.3207, holding a familiar range. From a technical perspective, bulls look for a rally above Apr 16 high of 4.3728. On the flip side, bears see Apr 9 low of 4.2527 and the round figure of 4.2500 as their key target. For now, the rate remains rangebound, with market participants on the lookout for fresh catalysts.
• PM Tusk declared that his government will continue its efforts to hold "those who lost [the elections] on October 15" to account for their "crimes and abuse of power" following his meeting with the Prosecutor General and the Minister Coordinator of Special Services on allegations surrounding the previous management of state-owned energy giant Orlen.
• NBP's Kotecki said that CPI inflation will likely quicken to around +3.0% Y/Y in June, adding that core inflation momentum doesn't allow for cutting interest rates yet.
• POLGB yields are generally a tad lower across the curve, while the WIG20 Index has faltered 0.7% this morning amid broader risk aversion.