POLAND: Glapinski's Dovish Pivot Rattles Polish Markets
- POLGBs and the zloty cratered on Thursday as Governor Adam Glapinski announced that the MPC took a "radical" and "significant" (his words, not ours) dovish turn. For what it's worth, the NBP's macroeconomic outlook and rhetoric have been at odds with analyst views for some time now, but the pace of convergence with market consensus took many off guard, as most expected the process to take several months. Departing from his earlier conservative narrative, the Governor guided that it the next set of monthly economic data confirms benign inflation trends, the MPC could reduce rates as soon as in May and refused to rule out a 50bp move. He repeatedly used the word "dovish" to describe his and the Council's monetary policy stance, despite acknowledging some residual risks and uncertainties.
- Our recent NBP coverage (see March review and April preview) highlights the areas of tension between the changing macroeconomic picture and the NBP's rhetoric. We saw some signals that the sentiment within the MPC was shifting, but thought the central bank was likely to wait with cuts until the next macroeconomic projection in July, as suggested by several Council members. This assumption now has to be revisited.
- Sejm Speaker and presidential candidate Szymon Holownia amplified pressure on NBP Governor Adam Glapinski and reiterated his call on the central bank to deliver interest-rate cuts "without unnecessary delay". Separately, Finance Minister Andrzej Domanski said he was "satisfied" with the Governor's dovish pivot as lower interest rates would reduce barriers to investments and ease the burden on mortgage takers.
- The central bank will release the minutes of March monetary policy meeting at 13:00BST/14:00CEST. These documents typically have no impact on the markets, but may provide some more interest from now on, amid the MPC's dovish pivot.
- The Finance Ministry will sell up to PLN6bn of 322-day bills today.
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USDJPY TECHS: Trend Needle Points South
- RES 4: 154.80 High Dec 12 ‘24 and a key resistance
- RES 3: 152.72 50-day EMA
- RES 2: 151.30 High Mar 3 and a key near-term resistance
- RES 1: 150.18 Intraday high
- PRICE: 149.66 @ 06:56 GMT Mar 5
- SUP 1: 148.10/01 Low MAr 4 / Low Oct 9 ‘24
- SUP 2: 146.80 2.0% 10-dma envelope
- SUP 3: 146.95 61.8% retracement of the Sep 16 ‘24 - Jan 10 bull leg
- SUP 4: 145.92 Low Oct 4 ‘24
USDJPY traded to a fresh cycle low Tuesday, but has recovered, and the pair is trading inside its recent range. The trend direction remains down and a resumption of weakness would pave the way for an extension towards 146.95, a Fibonacci retracement. Moving average studies remain in a bear-mode set-up, highlighting a dominant downtrend. Key S/T resistance is 151.30, the Mar 3 high. Clearance of this level is required to signal a base.
EURGBP TECHS: Approaching the 50-Day EMA
- RES 4: 0.8378 High Feb 6
- RES 3: 0.8357 50.0% retracement of the Jan 20 - Mar 3 bear leg
- RES 2: 0.8322 50-day EMA
- RES 1: 0.8313 Intraday hugh
- PRICE: 0.8308 @ 06:50 GMT Mar 5
- SUP 1: 0.8241 Low Mar 3 nd a near-term bear trigger
- SUP 2: 0.8223 Low Dec 19 and a key support
- SUP 3: 0.8203 Low Mar 7 ‘22 and a lowest point of a multi-year range
- SUP 4: 0.8163 123.6% retracement of the Dec 19 - Jan 20 bull leg
A strong reversal in EURGBP from its recent lows undermines the recent bearish theme and - for now - highlights a possible short-term reversal. The cross has traded through the 20-day EMA and sights are on a key resistance around the 50-day EMA, at 0.8322. Clearance of this level is required to strengthen a bullish theme. On the downside, key short-term support and the bear trigger, has been defined at 0.8241, the Mar 3 low.
EUROZONE ISSUANCE: EGB Supply
Germany has announced a 30-year mandate while Spain and France are both due to hold conventional auctions on Thursday and Belgium is due an ORI auction on Friday. Already this week, the Netherlands held a DDA, Belgium held a syndication whilst Austria and Germany held auctions. We look for estimated gross issuance for the week of E42.6bln (excluding retail operations), up from E35.6bln last week.
For the full document including more details on issuance this week and next week click here.EZ250305.pdf
- Germany is likely to hold a syndication today after it announced a mandate for a new 30-year Bund, maturing 15 August 2056.
- This has been on the cards for some time, but we had little conviction over the timing. We expect a similar size transaction to last year (E6bln with E1bln retained).
- Tomorrow, Spain will hold a Bono/Obli and ObliEi auction. On offer will be a shared E4.5-5.5bln of the 3.10% Jul-31 Obli (ISIN: ES0000012N43) alongside the on-the-run 10-year 3.15% Apr-35 Obli (ISIN: ES0000012O67). E250-750mln of the 0.70% Nov-33 Obli-Ei (ISIN: ES0000012C12) will also be on offer.
- This will be the first reopening of the 3.15% Apr-35 Obli, and is in line with our expectations.
- Also tomorrow, France will hold a LT OAT auction. On offer will be E11-13bln of the 4.75% Apr-35 OAT (ISIN: FR0010070060), the on-the-run 10-year 3.20% May-35 OAT (ISIN: FR001400X8V5), the 1.75% Jun-39 Green OAT (ISIN: FR0013234333) and the on-the-run 20-year 2.50% May-43 OAT (ISIN: FR001400CMX2)
- To conclude the week on Friday, Belgium will hold an ORI operation. Details will be announced tomorrow.
