Poland Weekly Focus | How much did market sentiment worsen?
PMIs for March will show extent to which market sentiment worsened since introduction of preventive measures. CSO suspended publication of flash inflation. NBP to present schedule of QE operations in April. Markets to continue focusing on pandemic developments.
March 31 | Flash inflation suspended. As of today (March, 30) Polish statistical office suspended publication of flash inflation estimates until further notice due to COVID-19 spread.
April 1 | Market sentiment to deteriorate in March. March PMIs will indicate the extent to which market sentiment worsened since the introduction of social distancing and other preventive measures. A sharp drop of PMIs in the Eurozone can only indicate the direction and the degree of the decrease. The market expects manufacturing PMI to drop to 45.1 in March.
Bond market drivers | Less volatility on long end of curve. Over the course of the week, volatility on the long end of the curve decreased. After stronger moves at the beginning of the week, when the 10Y yield moved by 20bp in both directions, it stabilized around 1.8% in the second half. As an aftermath, the spread over the 10Y Bund widened from 210bp to around 230bp, which we believe to be a justifiable level. The NBP has so far bought approx. PLN 19bn within their QE program. The volume and schedule of transactions for April should be presented by tomorrow.
FX market drivers | Zloty stabilized somewhat. Similarly to the bond market, volatility on the FX market eased slightly last week. The EURPLN strengthened from its highs reached in the middle of the week to above 4.60 and the EURPLN stabilized around 4.52. Although important macro releases are due in the US and Poland, the markets will likely continue to focus on the development of infection rates on both sides of the Atlantic.