Zloty Tad Weaker, Inflation Slows More Than Expected

EUR/PLN operates +41 pips at 4.3454 and bulls set their sights at Feb 7 high of 4.3564. A clearance of that level would mark the formation of a mini-double bottom pattern, bringing Jan 17 high of 4.4124 into view. Conversely, bears see the area around Feb 1 low of 4.3069 as the initial layer of support, with Dec 13 low of 4.2935 providing the next target below. Within CE3 FX space, the zloty trades flat against the forint but underperforms the koruna, with PLN/CZK pulling back after printing new cyclical highs at 5.8768.

• Poland's headline inflation cooled to +3.9% Y/Y in January, which may have had some psychological significance, given Governor Glapinski's suggestion that it would be around +4.0% or slightly above. Consensus was also leaning towards a reading in low 4s and the median estimate in a Bloomberg survey was +4.1% Y/Y. On the other hand, the relatively benign outturn does not materially change expectations of a V-shaped inflation path, with much uncertainty around the rebound in 2H2024. Furthermore, there is some uncertainty around the scale of correction to the January reading, which will be affected by the re-weighting of the CPI basket in March.
• The latest round of comments from NBP policymakers provided the immediate context in which the market interpreted today's data. A couple of MPC members played down Governor Glapinski's guidance pointing to the likely interest-rate pause through the remainder of the year, refusing to take any changes off the table (even as Kochalski and Dabrowski said that stable rates are the most probable scenario).
• Market participants added some rate-cut wagers this morning, albeit inflation data ultimately had little effect. Polish FRAs remain lower on the day, while POLGB yields fell 5.3bp-8.6bp.