Weekly Focus Poland
MPC confirmed that stability of rates is most likely scenario. Growth was revised upwards, while inflation forecast remained mostly unchanged. Fitch reaffirmed Arating and stable outlook for Poland. This week, final CPI is due Tuesday and trade data due Friday. Domestic data should have no major impact on bond and FX market, which remains under influence of global sentiment.
July 11: Final CPI number should show what was behind inflation rate easing to 1.5% in June Flash CPI arrived at 1.5% y/y in June, well below market expectations of 1.7% y/y. The details on what stood behind the drop from 1.9% y/y in May will be released on Tuesday. We expect that the dropping price of transport as well as lower than expected increase in food prices contributed to the easing inflation pressure.
Spread vs. Bunds continues to narrow Last week was marked by further increase in German yields. The 10Y yield went up from 0.47% to 0.57% on Friday, the highest this year, echoing the hawkish comments from major central banks. The Polish bond market followed the development on core markets; however, the magnitude of the move was mitigated by the narrowing spread vs. Bunds. As the uncertainty and political risks drop, the risk premium decreases. Moreover, the dovish MPC limits the pressure on the yield increase. This week, domestic data should remain neutral for the bond market, which is likely to remain more sensitive to global sentiment and comments from FOMC members, as Janet Yellen is scheduled to speak.
Zloty has been stable recently The zloty has been holding relatively stable over the last couple of weeks. This week, we do not expect any bigger movement on the FX market as well. Domestic data should be neutral for the zloty and we expect it to hold around 4.23 in the near future.