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Zloty Trims Gains Against Euro, Posts Losses Versus Greenback

PLN

EUR/PLN has clawed back its earlier losses and last deals at PLN4.6945, with familiar technical levels still in play. USD/PLN has recovered from a new cyclical low (PLN4.3133) and last trades +101 pips at PLN4.3352.

  • The market remains dovish on the monetary policy outlook after the confirmation of a December slowdown in retail inflation, despite gentle pushbacks from NBP officials and some sell-side analysts. Commenting on final CPI data for December, mBank and ING noted that the loosening of monetary policy is unlikely this year, with core inflation still at elevated levels.
  • In the course of the past couple of days, NBP's Kotecki said that there is no room for lowering rates this year, while Wnorowski raised the prospect of renewed hikes if the coming inflation outturns surprise strongly to the upside. Dabrowski noted scope for loosening might open up at the turn of the year, but refused to rule out hikes either, while Maslowska said further tightening is not off the table but is now unlikely.
  • Meanwhile, the beginning of the year saw a return of dovish sentiment in interest-rate markets, with FRA 12x15 contracts trading at a ~118bp discount to 3-month WIBOR and FRA 21x24 sitting ~238bp below that benchmark rate.
  • Elsewhere, Poland's current account deficit was smaller than expected in November, printing at EUR422mn versus the EUR1.014bn forecast. Trade deficit narrowed to EUR1.496bn against the consensus call for an EUR2.327bn shortfall.

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