Poland Weekly Focus | Inflation pressure to ease
We expect flash inflation estimate for October at 2.5% y/y, marginally below previous month’s figure. FOMC meeting and Eurozone first GDP estimate for 3Q19 should attract bond and FX market attention.
October 31 | Flash inflation for October. We expect the flash inflation estimate for October to further ease and arrive at 2.5% y/y (0.3% m/m), down from the 2.6% y/y observed a month ago. All in all, inflation pressure has somewhat weakened recently. We see the headline figure at 3.0% y/y at the end of the year, before peaking slightly above the upper bound of the inflation target at the end of 1Q20.
Bond market drivers | 10Y yield fluctuates around 2%. Over the course of the week, the Polish bond market focused on global developments and the 10Y yield followed core market movements. In the first half of the week, it dropped by almost 10bp to 1.95% and recovered towards the end of the week to close only marginally below 2%. This week, global events will again attract market attention, with the FOMC meeting and Brexit. We expect another quarter point rate cut in the US. Moreover, we will get to see the extent of the slowdown in the Eurozone in 3Q19, as the first flash estimate of GDP growth will be released this week.
FX market drivers | Zloty ends downward ride. The Polish zloty ended its strongest appreciation ride since 2008, as the EURPLN was mostly stable last week. We believe that the zloty will somewhat weaken and see it at 4.33 vs. the EUR at year-end. The FOMC meeting and flash estimate of 3Q19 GDP growth in the Eurozone will drive the development of the EURUSD. We might therefore see a more volatile zloty this week.