EUR-PLN continues to climb along the 50 DMA trend line. The cross is now approaching the key level of 4.50. The central bank is probably around the corner. MPC member Andrzej Kazmierczak created some confusion yesterday by saying that the PLN is more likely to depreciate than appreciate. We do not think that this statement implies that the NBP is comfortable with further zloty weakness. Inflation remains indeed an issue. Yesterday, the PPI showed the importance of FX in the price setting and today’s core inflation data (13:00 LDT) will confirm that underlying inflationary pressures are not easing yet. It is the reason why A. Kazmierczak has also added yesterday that if inflation stays around 4.0%, the NBP may hike rates even if such a move hurt the economic growth. Therefore, we believe that the NBP will respond to further PLN weakness and reappear in the FX market, combining its forces with the MoF.
HSBC Global Research