Zloty Resumes Rally, Jumps Onto Top Of EMEA Pile

The bounce in EUR/PLN on the release of Polish macroeconomic data proved temporary and the rate promptly resumed losses. It last changes hands at PLN4.5128, 244 pips lower on the day, probing the water below Friday's worst levels.

• The combination of the largest contraction in industrial output since 2020, faster-than-forecast and broad-based deceleration in PPI growth, as well as a strong and stable labour market are expected to support the NBP's "wait-and-see" approach going forward.
• Worth noting that MPC's Henryk Wnorowski suggested that pro-inflationary fiscal proposals unveiled during the ongoing election campaign may encourage the central bank to stick with the "wait-and-see" strategy for longer, albeit he argued against any pre-emptive tightening.
• On top of that, Citi wrote in a research note that the Finance Ministry have been converting more foreign inflows into PLN through the FX market rather than the NBP, which may have added fuel to the zloty's recent rally. They estimated that the government may have exchanged over EUR7bn into PLN in 1Q2023 alone.