Zloty Turns Bid Again After Two-Day Corrective Pullback

EUR/PLN has traded with a bearish bias this morning, with the zloty outperforming its EMEA peers. The rate staged a corrective rebound over the past two days, which was allowing an oversold trend condition to unwind. The pair last deals at -145 pips at PLN4.5290 and a resumption of losses past May 17 low of PLN4.4784 would give bears a green light for targeting Jun 7, 2021 low of PLN4.4360. On the flip side, bulls look for a test of the 20-EMA, which kicks in at PLN4.5565.

• In their morning research note today, Pekao analysts dispute the claims made by NBP hawks yesterday. They write that PLN appreciation may continue for longer than suggested by Joanna Tyrowicz while the inflationary impulse from fiscal expansion will be milder than estimated by Ludwik Kotecki. Pekao write that the balance of risks to the inflation outlook and the much more dovish orientation of most MPC members should support interest-rate cuts as soon as this autumn. Santander also see a more limited inflationary impact of new social spending (under +1pp versus Kotecki's estimate of +2pp) but note that Poland's FRA curve has shifted higher and there is scope for further gains.
• In local interest-rate markets, there has been some light correction to the recent upward trend in Polish FRA contracts but the point about a general upward adjustment this week still stands. POLGB yields sit 1.4-3.6bp lower, curve has flattened.
• The local economic calendar is empty today, with the packed docket for next week featuring PPI, labour market data and economic activity indicators.