Zloty Remains Stable, POLGBs Gain After Release Of Local Data

The zloty regained poise towards the end of last week and remains stable around previous closing levels this morning. EUR/PLN trades at 4.3554 proving resilient to catalysts. Fresh headline flow has been relatively limited, but local macroeconomic data were dovish on balance, yet the zloty's reaction was negligible and roughly coincided with downticks in CZK and HUF.

• Poland's December wage growth provided notable disappointment and retail sales also came in weaker than expected, while employment and industrial output contracted less than forecast. We summarised snap reactions of local sell-side desks in an earlier bullet.
• Weaker data have had firmer impact on the local FI space, with POLGBs strengthening and yield curve steepening amid short-end outperformance. They outperform regional peers as we type. FRA contracts are slightly weaker, despite market pricing being already more dovish than the rate path implied by recent sell-side commentary.
• From a technical perspective, should EUR/PLN resume losses moving past Jan 9 low of 4.3309, bearish focus would turn to Dec 13 low of 4.2935. On the flip side, bulls look for a clean break above Jan 17 high of 4.4124.