Like in Hungary, the May inflation in Poland surprised on the downside. The yearon- year inflation fell o 3.6%, which is the 15-month low. The low inflation readings were triggered by lower-than-expected prices in categories like transport and housing. We think that from the monetary point of view the low May inflation figure does no mean too much, because the headline inflation will return back to the 4%during the summer. So, given such an inflation scenario the NBP should stay in a wait-and-see mode, which is corresponding with our flat outlook for the NBP official rate.
Meanwhile, the pressure on CE currencies eased so they moved mostly sideways yesterday. Interestingly, correlation among regional currencies and their cross rates with the USD hit very high levels (see our FX Correlation Matrix). This implies that country-specific domestic factors play only negligible role in recent trading in Central Europe and the price action is completely driven by external factors. This
trading characteristic will probably intensify in the upcoming days.