Zloty Slightly Firmer Despite Dovish PPI Outturn

EUR/PLN remains below 4.40 following yesterday's corrective pullback from two-month highs. The rate last deals at 4.3841, a touch lower on the day. From a technical perspective, the initial bearish target is provided by Jan 9 low of 4.3309. On the flip side, bulls keep an eye on 4.4477, the 38.2% retracement of the Sep - Dec 2023 bear leg.

• The zloty has shown limited reaction to the release of local PPI data. Factory-gate deflation accelerated more than expected, with prices falling 6.4% Y/Y in December. Local sell-side analysts noted that it will support the moderation in CPI growth in the near term.
• NBP's Kotecki spoke against any imminent rate hikes or QT. While calling the September/October cuts an error, he suggested that raising rates now would not fix it and would likely confuse observers. He predicted that rates will likely remain higher for longer.
• ING expect a limited PLN rebound in the coming week or two (EUR/PLN pulling back no further than to 4.32) and in the medium term they see scope for a move in EUR/PLN to 4.20-4.25 amid strong PLN fundamentals. Millennium Bank note that technical factors limit the potential for EUR/PLN appreciation beyond 4.41.