The Polish zloty held to an extremely tight range at 3.91 EUR/PLN throughout most
of the session on Wednesday, as trading activity virtually came to a standstill ahead
of the afternoon testimony by Ben Bernanke and today’s Polish inflation and wage
data. After two days of struggling to keep up with its regional peers the zloty gave
way to the Czech crown as the worst performing CE4 currency yesterday, nevertheless
over the course of the week the PLN has remained the relative underperformer
and we uphold our view that in the short run this gives the unit some more room to
rebound. We expect the pair will eventually establish a new trading range below 3.90
before the end of the week even if the economic data prove to be uninspiring (as we
expect them to) - Bernanke’s soft testimony could foster the move as soon as today.
Regarding today’s trading all eyes will be on the inflation and job market data.
We are looking for headline CPI reading marginally below the consensus (more in the
FI part) but with the low 2006 base in place and food prices coming in on the lower
end of estimates in previous months the risks seem to be on the upside this time. On
top of this wage growth should come in above-consensus, which should fuel rate hike
expectations, but not to the extent to provide the zloty with much support though.
Hence from the trading perspective the regional sentiment will remain the key factor
to watch for now.
ČSOB - Investment research