Zloty Pauses Rally After 4.30 Figure Gives Way, NBP Speak Under Microscope

A clean break below the 4.30 figure generated fresh demand for the zloty, pushing EUR/PLN further beyond that psychologically significant level on Monday. The pair has been in consolidation mode this morning, struggling for a clear direction in the wake of this significant break. ING commented that a move towards 4.25 within the next 2-3 weeks cannot be ruled out, with the zloty supported by strong fundamentals and record-high eurodollar bond issuance supplying hard currency to government accounts. At typing, EUR/PLN is close to unchanged levels, last sitting +10 pips at 4.2814. Bears look for further losses past Feb 14, 2020 low of 4.2371. Conversely, bulls see the 50-EMA at 4.3319 as their initial taget.

• NBP's Joanna Tyrowicz wrote in a LinkedIn post that the inflation target has become a "running away target," as the probability that inflation falls below +3.5% Y/Y is declining, while also alleging that the new inflation projection has been compiled by the staff "under the obvious pressure of the Management Board." Meanwhile, Przemyslaw Litwiniuk said that rates will most likely remain unchanged for the remainder of the year, or - in a worst-case scenario - could be raised to reverse last year's premature easing. Separately, money.pl ran a report documenting a couple of explosive arguments at the most recent MPC meeting over Litwiniuk's public comments and over a resolution in defence of Governor Glapinski.
• The government confirmed that the suspension of VAT on food would be lifted at the end of this month, with the full 5% rate coming back from Apr 1. According to NBP estimates, this could boost CPI inflation by around 0.9pp.
• POLGB yields have stabilised and are marginally mixed at typing, curve runs slightly steeper. Finance Minister Domanski said Poland held its biggest-ever auction of USD-denominated bonds, selling $8bn of debt.
• The WIG20 Index is little changed as we type.