The Polish zloty recouped all of Monday’s losses against the euro overnight and comfortably settled back into the tight range between 3.78-3.80 in calm trade on Tuesday following the president’s decision not to call on early elections. With the snap poll off the table the market quickly returned to equilibrium as the rich eco calendar gradually came back into focus.
Later in the evening Finance Minister Zyta Gilowska was questioned about the Polish euro adoption perspectives and repeated the official government stance that Poland would enter the Eurozone only when it was fully prepared to do so. Given the government’s reluctance toward a hasty accession we believe that this will be no sooner than in 2012.
The inflation and wage numbers will be eyed keenly today as both might provide arguments in favor of further monetary easing. According to our estimates the CPI rose to 0.8% y/y in January compared with the 0.9% y/y expected by the market. Even though we see some risk that inflation will in fact come out gently on the softer side of our expectations it is also highly unlikely that it will exceed 1.0% y/y. Our wage growth estimate at 3.5% y/y is also slightly more conservative than the market consensus of 4.0%, and as such should reinforce the market’s rate cut expectations as well. Hence we could see fresh interest in Polish bonds later which is likely to spill over to the zloty.
(CSOB - Investment research)