POLAND: Core Inflation Eyed, MPC's Kochalski Sees Potential For July Cut
Mar-17 08:11
- The NBP will release core CPI data for February at 13:00GMT/14:00CET alongside January trade balance and current-account balance. Headline CPI came in at +4.9% Y/Y, significantly undershooting the 5.3% consensus forecast on the back of the annual re-weighting of the CPI basket, which shifted the starting point for this year markedly lower. The median estimate of core inflation in a Bloomberg poll was +4.0% Y/Y, but all of the predictions were supplied before Statistics Poland published the details of the annual revamp of the CPI basket. During the presentation of the NBP's Inflation Projection on Friday, head of the central bank's analytics said that the impact of the revision will fade with time and should already be negligible in 2026/2027.
- MPC's Ludwik Kotecki told Biznes24 TV that below-forecast CPI data rendered the NBP's macroeconomic projection outdated and said that the central bank should have waited with its monetary policy meeting until after the data was published. He noted that the projection may need an extraordinary revision in April, while the fact that inflation is tracking below the predicted path means that a motion to cut rates may appear already in 1H2025 (after April), depending on wage developments.
- Meanwhile, MPC's Cezary Kochalski told IBSNews that the central bank could reduce interest rates after the release of the next inflation projection in July. In his view, a one-off adjustment, possibly of a larger-than-usual magnitude, is more likely than a series of cuts. Kochalski said that the March inflation projection was more benign than the one from November and provided grounds for a discussion on interest-rate cuts, even if not yet for actual cuts.
- Money.pl reported that NBP Governor Adam Glapinski suffered another setback, as all members of the Management Board except Deputy Governors Marta Kightley and Adam Lipinski rejected his proposal to change the way Board meetings are scheduled, prompting the Governor to retract the proposal. This comes after local outlets reported that the MPC refused to sign a letter drafted by the Governor, replying to the Sejm Speaker's call for lower interest rates.
- NBP Deputy Governor Marta Kightley said during the LSE Polish Economic Forum in London that Polish exporters do not see the level of the exchange rate as a major problem. She also argued that joining the eurozone should not be a priority, noting that Poland has managed to grow faster than the bloc despite having higher interest rates.
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US TSYS: Yields Pull Back Again With Consumer Growth Story In Question
Feb-14 21:08
Treasuries outperformed global counterparts Friday, fully completing a reversal from a midweek selloff.
- A large miss in January retail sales (-0.9% M/M vs 0.7% prior, -0.2% consensus) represented the biggest sequential drop in 22 months, with a similarly weak "control group" figure leading to a 0.5pp downgrade to the Atlanta Fed's GDP nowcast (to 2.3% GDP growth in Q1, i.e. no acceleration from Q4).
- That was enough to see the 10Y Treasury yield drop 7bp in the subsequent half hour, continuing the downtrend seen beginning in the immediate aftermath of Wednesday's hot CPI release. 10Y yields dropped over 21bp from the Wednesday high to Thursday's low, ultimately ending a tumultuous week 1.5bp lower.
- Yields ticked a little higher in afternoon trade Friday but the curve leaned bull steeper on the day, with the belly outperforming: 2-Yr yield is down 4.6bps at 4.261%, 5-Yr is down 5.7bps at 4.3328%, 10-Yr is down 5.1bps at 4.4782%, and 30-Yr is down 3.9bps at 4.6982%.
- In futures: Mar 10-Yr futures (TY) up 9/32 at 109-08 (L: 108-26 / H: 109-15.5).
- Other data (industrial production mixed, import prices soft) had little lasting impact.
- The coming week’s data schedule is relatively light, due in part to Monday’s Presidents Day holiday (SIFMA recommends bond cash close, equities closed), with initial jobless claims, February prelim PMIs, and regional Fed manufacturing surveys among the highlights. Supply includes 20Y Bond and 30Y TIPS auctions.
- We also get plenty of Fed communications including the January meeting minutes, and speaking appearances by both doves (Gov Waller) and hawks (St Louis Pres Musalem).
USDCAD TECHS: Bear Cycle Extends
Feb-14 21:00
- RES 4: 1.4948 High Mar 2003
- RES 3: 1.4814 High Apr 2003
- RES 2: 1.4503/1.4793 High Fb 4 / 3 and key resistance
- RES 1: 1.4380 High Feb 10
- PRICE: 1.4175 @ 16:54 GMT Feb 14
- SUP 1: 1.4107 50.0% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 2: 1.4011 Low Dec 5 ‘24
- SUP 3: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD broke lower Thursday, breaking out of a tight trading range this week and remains soft. A key support at 1.4261, the Jan 20 low, has been cleared and this signals scope for an extension of the current bear cycle - a correction. Scope is seen for a move towards 1.4107, a Fibonacci retracement. Initial firm resistance to watch is 1.4380, the Feb 10 high. A break would highlight an early bullish reversal signal.
OPTIONS: Mixed SOFR Rates Trade To Cap Week
Feb-14 20:47
Friday's US rates/bond options flow included:
- SFRH5 95.62p, traded half in 2k.
- SFRH5 96.93c, traded 0.25 in 4k.
- SFRH5 95.75/95.62ps 1x2, Traded 3.75 in 3k.
- SFRK5 97.00c, traded for 0.75 and 1 in 3k.
- SFRU5 95.93/95.81/95.68p fly, traded 1 in 1.5k
- SFRU5 96.50c, traded for 6.5 in 1.5k.
- SFRU5 95.87^, traded for 36 in 5k.
- SFRJ5 95.87/95.75/95.68p fly 1x3x2 with SFRK5 95.81/95.68/95.62p ladder 1x3x2, bought for 10 in 2k.
- SFRM5 95.68p, sold at 2.5 in 10k.
- 0QH5 96.00c, bought for 13 in 3k.
- TYH5 107p, bought for 11 in 15k
- TYJ5 107p, bought for 11 in 17k total.
- TYJ5 107/106ps, bought for 7 in 15k total.
