PLN: Zloty On Back Foot, CE3 FX Under Mild Pressure

• Perhaps the most significant thing that we heard from Megan Greene in her Bloomberg TV interview today was what she didn't say. She said that over the past eight months she had been more on the "cautious" side of the cutting cycle. But she didn't use either of the recent MPC buzzwords ("careful", "cautious" or "gradual") when describing her view going forward.
• She said that she thought there were risks on both sides but that "the tariffs actually represent more of a dis inflationary risk than an inflationary risk, though, and so we'll have to see how that develops going forward."
• She was very careful not to pre-commit to anything other than noting that investors saw the neutral rate between 3.25-3.50% "I don't think that's totally unreasonable."
• Recall that the MPC had a debate about whether to use "careful" or "cautious" in their February official communication and decided to go with "careful" - implying that "cautious" was too strong and directional at the time. But "cautious" was then used by Greene in March and by Pill in February (both post February MPR) - two of the more hawkish members of the MPC.
• In fact on 5 March, Greene said "While the disinflationary trend is broadly intact, I believe it is appropriate to maintain a cautious and gradual approach to removing monetary restrictiveness."
• Today's comments seem to be a step down - but the market has already repriced since Greene's last comments so are not a huge surprise.

• The significant EURUSD rally was bolstered on Monday following a quick surge through the 1.15 handle. The pair reached fresh cycle highs at 1.1573, the highest print since Nov 2021, extending the recovery off the Feb 03 lows to an impressive 14.1%.
• Spot has recently broken some notable trendlines, and the latest rally has seen a breach of an important pivot resistance level at 1.1495, of which we have spent the majority of Tuesday’s session consolidating above. The break higher maintains the price sequence of higher highs and higher lows and note that moving average studies continue to signal a dominant uptrend. The focus is on 1.1608 next, the Nov 9 2021 high.
• ING acknowledge picking a top in the pair has proven a frustrating exercise. While they still see 1.13 as a more likely quarter-end target, they admit the risks remain markedly skewed to further deviations on the upside. If the Fed caves to Trump’s pressure and cuts rates, the damage to the dollar might be enough to take EURUSD to 1.20. ING would however see that more as the top of the dollar’s confidence crisis rather than a new normal for the pair.
• Eurozone flash PMIs highlight the economic calendar this week, providing the latest growth indications as the tariff-war permeates. The data is particularly pertinent given ECB rhetoric has made clear that downside growth risks have increased, and the probability of a June ECB cut currently stands ~90%.

FVM5 109.50 calls see two-way flow at 0-18/0-18+ over the last 30 minutes or so, with a little over 8K lots changing hands at those levels (mostly at 0-18), contract left 0-17+/0-18+ at typing.