PLN: Zloty Holds Steady Ahead Of NBP Week
EUR/PLN continues to oscillate within the 4.15-4.20 price corridor, last trades flat on the day at 4.1764. A break above the 50-EMA intersecting at 4.2020 would support the bullish case, while bears look for a retreat towards Feb 27 low/round figure of 4.1272/4.1000.
- The zloty has drawn support from the NBP's restrictive monetary policy, with the reference rate kept at 5.75% since October 2023. MPC's Kotecki said earlier this week that the inflation backdrop already leaves room for lowering interest rates, but various other factors may delay the first move until 2H2025. The panel is expected to stand pat on rates next week, but the new inflation projection may rekindle the debate on the interest-rate outlook.
- Regional geopolitics continue to be a major source of uncertainty for the zloty, with the following questions hanging in the air: (1) whether some form of ceasefire in Ukraine is probable in the coming weeks/months, (2) whether a potential truce could be converted into lasting peace, (3) whether European NATO allies can maintain a credible deterrent against Russia in the light of changes in US policy.
- POLGBs have weakened, despite cutting some of the initial losses. The Finance Ministry is looking to sell PLN1bn-3bn of 50-week T-bills at today's auction.
- Major local stock indices are barely changed on the day after clawing back initial losses.
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UK DATA: Stagflationary Signals In Jan Services PMI
Small downward revision to the UK January services PMI (50.8 vs 51.2 flash, 51.1 prior). The composite reading nonetheless ticked up to 50.6 (vs 50.9 flash, 50.4 prior). Overall, the services release screens as stagflationary, with wage-driven input cost increases being passed through to output charges, and the employment outlook remaining soft.
Key notes from the release:
- “Greater payroll costs meant that input price pressures continued to intensify at the start of 2025. The overall rate of cost inflation was the highest for nine months, which resulted in a robust and accelerated rise in average prices charged by service sector firms”.
- “While some service providers commented on the impact of global economic uncertainty and elevated interest rates, many firms also linked lower new orders to weaker business confidence in the wake of the Autumn Budget”
- “Export sales decreased for the second month running”… “Resilient demand from US clients was reportedly offset by lacklustre spending across Europe”.
- “The rate of job shedding accelerated to its fastest since January 2021. Anecdotal evidence suggested that rising payroll costs and lower margins had encouraged hiring freezes and a focus on boosting operational efficiency”
- MNI’s BOE preview is here.
MNI: UK FINAL JAN SRVCS PMI 50.8 (FLASH: 51.2); DEC 51.1
- MNI: UK FINAL JAN SRVCS PMI 50.8 (FLASH: 51.2); DEC 51.1
- UK FINAL JAN COMPOSITE PMI 50.6 (FLASH: 50.9); DEC 50.4
STIR: SFRU6/Z6/H7 Fly Sold
SFRU6/Z6/H7 fly 3K sold at -0.5, with another 300 lots trading on the follow, ~32K bid still there.
