Polish Zloty: Dovish stance leaves PLN vulnerable against Euro – ING

ING's Frantisek Taborsky reports that the National Bank of Poland has taken a dovish stance, indicating no immediate need to change interest rates until mid-next year, despite inflation on the rise. This allows the EUR/PLN to regain ground and leaves room for further increase, as delayed rate hikes and a cautious tone are expected to keep Poland's already steep yield curve under pressure.

The National Bank of Poland provided no shocks yesterday, and its governor remained softer compared to its rivals, matching market expectations and global trends. While the governor acknowledged recent inflation increase, he does not believe rates need adjustment, possibly until mid-next year when weaker GDP growth should start easing price pressures.

EUR/PLN rebounded to 4.320-4.330, aligning with yesterday's range, as the softer repricing narrowed the rate differential. We see potential for a further move towards 4.330-4.340 today. Rates are only marginally moving, with energy prices still driving the market. Delayed rate hikes remain the norm, and a softer tone should steepen the curve further, even though Poland already boasts the steepest curve among emerging markets.