PLN: Defensive Flows Hurt Zloty

EUR/PLN has added 62 pips, cutting its weekly loss amid broader risk-off flows. The pair deals at 4.2552 and bulls look for a move toward Apr 16/Dec 25 highs of 4.3102/4.3114, while bears keep an eye on May 15 low of 4.2230.

• The broad-based WIG Index has shed 1.8% and the blue-chip WIG20 sits 2.0% lower on the session. Stocks have come under pressure amid wider risk aversion, with banking stocks showing little reaction to the news that parliament passed an increase in corporate tax rate for the sector. The approval of the proposal was expected, but the legislation must still be signed by President Karol Nawrocki (his top aide said that he would 'analyse' the bill before making a decision), while banking lobbies are planning to mount legal challenge to the proposed changes.
• POLGB yields have edged away from session lows but still sit 3.1-4.2bp below neutral levels. The 3-month WIBOR/1x4 FRA spread is 21.5bp despite a recent barrage of comments from NBP members, most of whom signalled a cautious approach to further monetary easing in the near term, while admittedly leaving the door ajar for more cuts in this cycle.
• Finance Minister Andrzej Domański told CNBC that Poland cannot afford to cut back on defence spending but will continue work to reduce budget deficit in the coming years.