PLN: POLGB Auction, Flash October CPI Eyed This Week
Oct-29 09:55
EUR/PLN has gravitated toward the lower end of its horizontal trading range dating back to the NBP's dovish pivot in April. Despite creeping higher this morning, it last deals at 4.2354, with bears eyeing another attack on May 15/Oct 22 lows of 4.2230/4.2227. Bulls look for a rebound toward Apr 16/Dec 25 highs of 4.3102/4.3114.
- POLGB yields have crept higher, last sit up to 1.2bp above neutral levels. The focus turns to the auction for PLN6bn-10bn worth of POLGBs, which comes after last week's offering fell short of outsized expectations, even as demand exceeded the upper end of planned supply. BGK wrote this morning that they expect today's offering to be neutral for the local FI market but think that overall positive sentiment around POLGBs should remain.
- Flash October CPI readings on Friday will provide a key signal ahead of next week's 'live' NBP monetary policy meeting. The central bank's Przemysław Litwiniuk yesterday suggested that an imminent interest-rate cut is in play, even if not a done deal, but his comments came after several of his colleagues indicated preference for caution.
- The broad-based WIG Index is 0.3% softer, while blue-chip WIG20 is 0.4% worse off. The government greenlighted draft legislation envisioning tax measures that would support copper and silver miner KGHM.
- Otherwise, broader-picture developments (Fed rate decision, Sino-US trade matters) should remain in the driving seat until the release of local CPI data.
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MONTH-END EXTENSIONS: Bonds and FX Month End
Sep-29 09:54
MONTH END EXTENSION: Wouldn't expect too much of a late bid in Govies Tuesday, at least shouldn't be Month End related. The EU stands out, but these are still on the Small/Average side.
Bloomberg Bonds:
- US Tsys: +0.06yr (small).
- EU Govies: +0.08yr (average).
- UK Govies: 0.00yr (non event).
MS Bonds:
- US Tsys: +0.03yr (tiny).
- EU Govies: +0.07yr (average).
- UK Govies: -0.02yr (non event).
Barclays FX:
- Barclays: Their passive Month-End and Quarter-End rebalancing model shows moderate USD selling against all majors.
OUTLOOK: Price Signal Summary - EUROSTOXX50 Futures Clear Resistance
Sep-29 09:50
- In the equity space, a bull cycle in S&P E-Minis remains intact. Key short-term resistance has been defined at 6756.75, the Sep 22 high where a break would resume the primary uptrend. This would open 6787.63, the 1.382 projection of the Aug 1 - 15 - 20 price swing. On the downside, the contract has recently pierced initial support at the 20-day EMA, currently at 6640.59. A clear breach of this average would signal scope for a deeper retracement, potentially towards the 50-day EMA, at 6526.11.
- EUROSTOXX 50 futures have started the week on a bullish note. Today’s gains have resulted in a breach of key resistance and the bull trigger at 5525.00, the Aug 22 high. The break confirms a resumption of the uptrend and paves the way for a climb towards 5564.82, a 0.764 projection of the Aug 1 - 22 - Sep 2 price swing. Initial firm support lies at 5433.67, the 20-day EMA.
GILTS: Bull Flattening, Ramsden & Reeves Eyed
Sep-29 09:34
Gilts have rallied alongside global core FI peers to start the week, with U.S. government shutdown risk in focus (despite the equity uptick).
- Lower crude oil prices provide some background support as well.
- Futures traded as high as 90.82 before easing back to ~90.70.
- The bearish technical structure in the contract remains evident, with initial support and resistance located at 90.26 & 91.28, respectively.
- Yields 1.5-3.0bp lower, curve flatter.
- Chancellor Reeves has spoken with several local media outlets before her ~12:00 London address at the Labour Party conference.
- Reeves reiterated the government’s election pledge not to lift the 3 major taxes, while pushing back against the idea of a wealth tax.
- The UK’s ongoing fiscal deterioration is well-documented (limiting gilt rallies and keeping bearish/steepener technical setups in place), as such, pre-Budget comms from Reeves are set to provide the focal point of her address.
- Elsewhere, BBG sources have suggested that Reeves “is debating whether to get rid of the Office for Budget Responsibility’s annual March outlook to strengthen her commitment to holding just a single fiscal event a year and bring greater stability to economic policy making”.
- SONIA futures -1.0 to +2.0, strip twist flattens.
- BoE-dated OIS little changed, showing 4.5bp of easing through year-end and fully discounting the next cut through the end of the April MPC.
- BoE Deputy Governor Ramsden is set to speak from 13:00 London. We view him as the most dovish MPC member that didn’t vote for a rate cut earlier this month.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Nov-25 | 3.960 | -0.8 |
Dec-25 | 3.924 | -4.4 |
Feb-26 | 3.819 | -14.8 |
Mar-26 | 3.788 | -18.0 |
Apr-26 | 3.709 | -25.9 |
Jun-26 | 3.690 | -27.8 |
