Zloty Weakens Amid Upside Revision To Dec CPI, Continued Political Turmoil

EUR/PLN has extended gains after Statistics Poland revised final December CPI to +6.2% from a flash reading of +6.1%. The zloty has fallen behind its CE3 peers as a result, with the space underperforming the remainder of EMEA FX. The pair last deals at 4.3758, almost 200 pips higher on the session, piercing the 50-EMA (4.3687) as bulls look for continued gains. Bears see Dec 13, 2023/Mar 4, 2020 lows of 4.2935/4.2870 as their initial targets.

• POLGB curve has bear flattened after MPC's Ireneusz Dabrowski suggested that the central bank could consider raising rates or offloading some of the bonds purchased during the pandemic if the new government terminates anti-inflationary measures in 2H2024. His comments came as a surprise given Dabrowski's earlier bias, with the latest PAP survey (from September) showing that he was seen as the most dovish policymaker. When this is being typed, POLGB yields sit 4.2-8.9bp higher across the curve and local debt underperforms regional peers.
• Political risk may be adding some pressure to the zloty as tensions between the new ruling coalition and officials associated with the previous administration escalate. This also applies to the NBP, with PM Tusk noting that his camp may still explore ways of probing central bank chief Adam Glapinski.