Zloty On Back Foot Along Regional Peers Amid Post-Election Jitters, Lower Czech Inflation

EUR/PLN extends its recent rally, entering the area above the 4.34 mark, as the wider CE3 space shows some weakness in early trade. The release of weaker-than-expected CPI data out of Czechia may have spilled over into regional FX, even as Polish central bank members keep broadcasting their well-documented message re: preference for a longer period of stable interest rates.

• In the latest round of NBP speak, Ludwik Kotecki called the 100bp worth of monetary easing delivered in 2023 "premature" and said that it might pressure the MPC to take steps in the opposite direction. However, the fact that such a move could confuse the markets significantly reduces is probability. Against this backdrop, there is no room to cut rates by the end of the year.
• The fact that CE3 FX started the week on the back foot has been attributed to the outcome of the European election and the resultant political uncertainty around the bloc at a time when it is facing a multitude of challenges. The key repercussions included French President Emmanuel Macron's decision to call a snap parliamentary election and the resignation of Belgian PM Alexander De Croo.
• EUR/PLN last deals +209 pips at 4.3460. A sustained break above the 76.4% retracement of the Apr 16 - May 28 sell-off at 4.3431 would turn the focus towards the starting point of that retracement at 4.3728. Conversely, bears look for a pullback past Jun 6 low of 4.2727.
• POLGB yields are lower across the curve, with the Finance Ministry about to conduct a switch auction. It will offer OK0426, PS0729, WZ1129, DS1030 and DS1034 bonds, while looking to buy back OK0724, PS1024, PS0425 and WZ0525.