Zloty Remains On Back Foot, CJEU Verdict On CHF Loans Eyed Tomorrow

EUR/PLN remains afloat and last trades +368 pips at PLN4.4832, with the zloty underperforming all its EMEA peers. The focus is on key risks ahead, including final May CPI report and the EU top court's ruling on FX loans (both due tomorrow morning). Poland's banking lobby head told Bloomberg that lenders will likely increase reserves gradually rather than take any drastic moves in case of a pro-consumer verdict from the CJEU.

• Most sell-side desks mentioning the TSUE ruling in their notes flagged it as a potential source of volatility. However, Santander wrote that this factor did not limit recent zloty appreciation, which suggests that the focus is on other factors now. BOS Bank also point to the recent strength of local assets despite expectations of a pro-consumer verdict. According to Alior Bank, a pro-consumer ruling would likely weigh on the zloty. Meanwhile, PKO cited comments from S&P analyst H. Verhaag, who said that an unfavourable CJEU verdict would not affect the banking system to any significant extent.
• Commenting on a worse-than-expected outturn for April trade balance, the NBP said that notably lower foreign trade growth rates stemmed from lower prices in trade (supported by PLN appreciation) on the one hand and the economic slowdown in Poland and its major trading partners on the other.
• The government confirmed that next year will see a record increase in minimum wage, to the tune of 23.2%, which will be implemented in two steps reaching PLN4,300 per month from next July. The announcement was made as the government unveiled assumptions for the 2024 budget.