On Friday, the Central European currencies fell against the euro. The losses were, however, rather modest; the koruna breached above the 55 days average (EUR/CZK 25.38) and the forint flirted with resistance at EUR/HUF 293. The zloty outperformed its peers and fell merely by 0.2 percent even though January inflation in Poland lagged behind expectations.
The Polish statistical office said that prices grew just 1.7 % year-on-year which was on the downside of both our and market expectations. Regarding structure, the biggest surprise was virtually no change in housing prices (making up about a fifth of the consumer basket price). In the light of inflation figures, data on wages (to be released next Monday) and industrial output (Tuesday) for January will certainly grab market´s attention.
Although we continue to bet on a pause in the Polish monetary easing cycle (particularly, if statistical data confirm that industry is bottoming out in line with our leading indicator´s forecast), the considerable decline in inflation rate has definitely strengthened doves in the Monetary Policy Council and hence we cannot rule out one more rate cut to be delivered in March.