PLN: Zloty Holds Steady, POLGB Auction Takes Focus

EUR/PLN probed the water below May 15 low of 4.2230, which was followed by a corrective rebound above that key support. The rate last deals -8 pips at 4.2333 but a fresh round of sales and consolidation below 4.2230 would signal that bears are having the upper hand. Meanwhile, bulls look for a recovery toward Apr 16/Dec 25 highs of 4.3102/4.3114.

• There is no consensus as for the reasons behind PLN outperformance yesterday but ING argue that the prospect of firmer US economic pressure on Russia may have supported the zloty, even as the technical picture does not leave much room for further appreciation. BGK wrote that foreign capital inflows in anticipation of today's POLGB auction may have boosted the PLN, but they also see the move as a one-off. Others suggested that a decent enough package of September data may have persuaded investors that the NBP is in no rush to cut interest rates further.
• POLGB yields have crept higher, last sit 2.9-3.1bp above neutral levels, unwinding yesterday's moves. The focus turns to a PLN7bn-12bn debt auction, which sees OK0128, WZ0930, PS0131, IZ0831, DS1033 and DS1035 bonds on offer. The mood music around the auction has been positive after a strong offering on October 15 and amid the prospect of continued NBP rate cuts (which stands in contrast with the outlook for regional peers) and the redemption of OK1025 on Friday. The local debt market has so far been immune to Poland's deteriorating fiscal metrics.
• Elsewhere, any fresh developments around the Russo-Ukrainian war and regional political risk outlook will be of interest.
• Poland's registered unemployment rate ticked higher to 5.6% in September, in line with expectations.