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2020/05/04 / Erste Group Research

Poland Weekly Focus | Sentiment drops in April

PMI and ESI for April plummeted, showing impact of containment measures on market sentiment. No releases scheduled this week. Markets likely to follow global news.

PMI dropped to historically low level. Manufacturing PMI for April dropped to 31.9, from the 42.2 observed in March – the biggest monthly decrease since June 1998, when such data began to be collected. New orders, output and export sub-indices recorded an unprecedented drop. The April figure arrived below levels observed in the Eurozone (33.6 in April) and other CEE countries (CZ at 35.1 and HU at 33.6). The drop in the PMI went hand in hand with a decrease in the economic sentiment indicator (ESI), which plummeted to 47.2 in April. With such severe deterioration of market sentiment, we see downside risks to our FY20 GDP growth forecast.

Bond market drivers | 10Y yield went up. Last week, the long end of the LCY curve went up despite decreasing yields on core markets. While the 10Y Bund dropped below -0.55%, the 10Y Polish yield increased to above 1.45%, returning from all-time lows. As a result, the spread vs. the 10Y Bund widened more visibly to 205bp. We see the current spread level as justifiable and expect it to remain around that value until the end of 2Q20. Last week, the National Bank of Poland held another outright operation and bought PLN 13.2bn in Treasuries and state guaranteed bonds.

FX market drivers | Zloty weakened at end of month. The weakening of the US dollar against the EUR was associated with the depreciation of the zloty and the EURPLN peaking at 4.57 on Friday, also due to the public holiday likely lowering liquidity on the market. The better start to the new week did not last long, as the weak PMI for April pushed the EURPLN back above 4.55. The US labor market report for April will show the first full impact of the containment measures, with surging weekly new jobless claims making for limited impact on the EURUSD. The zloty should follow COVID-19 related news as there are no important releases scheduled for this week.

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General information

AuthorErste Group Research
Product nameCEE Country Update
Topic in focusMacro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-


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