PLN: EUR/PLN Flirts With 4.20, Hawkish NBP Gov's Speak Put Into Question
The 4.20 mark has become a line in the sand for EUR/PLN, which keeps testing the area. The rate last deals at 4.1983, a touch higher on the day, with bulls looking for a clean break above the 50-EMA/round figure at 4.1982/4.2000 before setting their sights firmly on Feb 4 high of 4.2379. Conversely, a sell-off past trendline support at 4.1853 would turn the focus to Feb 27 low of 4.1272.
- The past week has supplied a slew of fresh arguments to NBP doves, neutralising the impact of Governor Glapinski's hawkish press conference last week (which we saw as leaving the door ajar to monetary easing later this year - see here). It is increasingly clear that the actual inflation path will undershoot that charted in the NBP's March projection on the back of (1) dovish revisions to the CPI basket, (2) faster-than-forecast cooling of wage growth, (3) energy price outlook being more benign than assumed by the central bank.
- Adding to the ongoing debate on the interest-rate outlook, MPC's Ireneusz Dabrowski wrote on X that wage data released yesterday confirmed that inflationary processes are fading away, which "bodes well for the future."
- POLGBs are broadly firmer across the curve amid a degree of strength in core FI space. 10-year POLGB/Bund spread has been tightening since the beginning of this year and now hovers just above 300bp.
- The WIG Index extends its pullback from recent all-time highs, shedding 1.1% this morning. The WIG20 operates 1.6% lower on the session.
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BUNDS: /SWAPS: Defence Spending Risks Bearish For Long End Swap Spreads
{GE} BUNDS/SWAPS: German ASWs vs. 3-month Euribor are tighter but trade within 0.5bp of yesterday’s closing levels after debt issuance risks surrounding increased defence spending helped counter the (initially U.S. swap spread-driven) widening seen late last week.
- The Buxl ASW is the only spread which hasn’t fully retraced last week’s move.
- We have suggested that fundamentals point to continued tightening pressure in long end ASW spreads in the medium-term and increased defence spending would add further weight to this idea, as does the potential for debt brake reform.
- More broadly, Commerzbank play down the likelihood any fundamental regulatory shifts within EUR markets, noting note that “while ECB heavyweights are now actively calling for regulatory relief, we doubt that the Leverage Ratio is the binding constraint for € repo intermediation considering GC/specialness dynamics during the past 15 months.”
- As a result, Commerzbank reaffirm their view that “recoveries in (ultra-)long Bund spreads should be used to add to structural shorts.”
Fig. 1: German ASW Spreads (Vs. 3-Month Euribor)
Source: MNI - Market News/Bloomberg
BONDS: US and UK Roll views
These could pick up with Friday's PMIs in mind, and they will be concluded on the 27th for Gilt and 28th Feb for Treasuries.
JPM:
- WNA: Bullish.
- USA: Bullish.
- UXY: Mildly bearish.
- TYA: Mildly bearish.
- FVA: Bearish.
- TUA: Bearish.
DB:
- WNA: Bullish.
- USA: Bullish.
- UXY: Mildly bearish.
- TYA: Mildly bearish.
- FVA: Bearish.
- TUA: Bearish.
Soc Gen:
- WNA: Bearish
- USA: Neutral/Bearish.
- UXY: Neutral.
- TYA: Mildly Bearish.
- FVA: Bearish.
- TUA: Mildly Bearish.
UBS:
- UBS recommend selling Gilt Roll.
