Zloty Remains Firmer Following Release Of Local CPI Data

The zloty shows muted reaction to the release of Poland's preliminary October CPI readings, with headline inflation coming in at +6.5% Y/Y versus +6.6% expected. Any optimism about the narrow miss against the median forecast has likely been countered by the worrying structure of the data (especially underlying the M/M reading) as well as signals on the inflation outlook. Several sell-side desks interpreted the data as a confirmation of earlier concerns that we might be past the period of relatively quick disinflation.

• Political tug-of-war continues to draw attention, with pro-EU parties trying to forge a coalition agreement, which would determine their joint policy agenda and personal appointments. Related headline flow remains noisy, with parties likely seeking to improve their negotiating positions via media statements and leaks to the press.
• EUR/PLN has traded with a bearish bias this morning, which continued after the release of CPI data, before a mild correction. The rate sits at 4.4455, down 33 pips on the session, with bears looking to test Oct 17/Jul 31 lows of 4.4096/4.3986. On the topside, the 50-EMA provides the initial target at 4.5168.
• POLGBs trade on a firmer footing, with yields down 4.9-7.0bp across a flattening curve. Polish FRAs remain under light pressure, extending the recent move lower.