Zloty's Reaction To Benign Inflation Data Proves Short-Lived, POLGB Yields Stay Lower

EUR/PLN briefly ticked higher in reaction to the release of below-expectation preliminary inflation readings for May. The move was promptly retraced and the rate last deals at 4.2530, little changed on the day. Bears look for a sustained move through 4.25 after probing the water below that level yesterday. A clean break would open up 4.2131, the 1.00 projection of the Jan 17 - Apr 9 - Apr 16 price swing. Bulls keep an eye on the 20-EMA, which intersects at 4.2732.

• Headline inflation accelerated by just 0.1pp to +2.5% Y/Y, missing the consensus forecast of +2.8%. Local sell-side desks estimated core inflation at around +3.8-3.9% Y/Y. Some noted that the rise in food prices was relatively modest, considering the re-introduction of a higher VAT rate.
• NBP's Wnorowski called the data a "very good piece of information" but quickly added that the central bank's task is to ensure the sustainability of disinflation. The official pointed to wage pressures and inflation expectations as key sources of concern.
• POLGB curve has shifted lower, with 5s outperforming at typing. Price action has been at odds with regional peers, with POLGBs catching a bid in reaction to Polish inflation data amid a downtick in Polish FRAs.