PLN: Zloty On Defensive Ahead Of NBP Rate Decision

The zloty has depreciated alongside regional peers, albeit by a somewhat wider margin than CZK or HUF. This comes as the greenback is showing some strength (BBDXY +0.1%), while zloty-oriented market participants await the outcome of the NBP's monetary policy meeting. When this is being typed, EUR/PLN trades +88 pips at 4.2675, with bulls looking for gains towards the 50-EMA at 4.2808. Bears continue to look for a sustained break below the 4.25 figure.

• Virtually all analysts expect Polish central bankers to keep interest rates unchanged in a well-telegraphed decision, with earlier communications taking monetary easing off the table while inflation it yet to reach its local maximum. That said, today's MPC statement and tomorrow's press conference may provide new information on the interest-rate outlook. The Governor's hawkish pivot last month was met with scepticism by several of his colleagues. NBP watchers will be interested to see how official communications evolve in the light of growing tensions between MPC members.
• The rate-setting panel is expected to sit on its hands despite the release of dovish revisions to December inflation data yesterday, with a number of desks lowering their estimates of core CPI. Official readings of underlying inflation will be published by the NBP at 13:00GMT/14:00CET. As flagged in an earlier post, it is worth paying attention to other measures of core inflation than the widely covered CPI ex-food and energy. To substantiate this further, the NBP has been placing much emphasis on the role of administrative factors, with some fees being hiked from January (e.g. excise taxes or certain utility fees), which increases the importance of monitoring fundamental price dynamics in the economy.
• POLGB yields are generally lower across the curve, last sitting 0.2-3.4bp shy of neutral levels. The WIG20 Index has erased its initial gains.