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2019/05/14 / Erste Group Research

Weekly Focus Poland

This week, we expect to see flash 1Q19 GDP at 4.7% y/y and the MPC keeping the policy rate flat. The inflation rate surprised to the upside, arriving at 2.2% y/y in April and we will get to see the details. We expect the MPC to sustain its recent rhetoric supporting stability of rates, despite increasing risks of inflation touching 3.0% at the end of the year. The bond and FX market will remain under global impact.

May 15: 1Q19 GDP expected at 4.7% y/y. Despite rather weak market sentiment, the real economy showed no signs of slowing down throughout 1Q19. On the contrary, average growth of industrial output accelerated to 6.2% and retail sales also remained solid. Economic growth in the Eurozone also surprised to the upside, which leaves room for optimism. We see 1Q19 GDP growth at 4.7% y/y.

May 15: MPC to sustain rhetoric on interest rate stability. There is a broad consensus that the MPC is to leave the policy rate flat at 1.5%. Given that the inflation rate increased to 2.2% y/y in April and GDP growth should remain solid, this may generate speculation that the interest rate might increase. Indeed, the probability that inflation may touch 3% at the end of the year has visibly increased.

Bond market drivers: Polish 10Y yields returned to 2.8%. The long end of the curve reacted to the flash CPI release and major upside surprise. The 10Y yield went up above 3.0% the other week. However, over the course of last week, the 10Y yield went down by roughly 20bp and came back to recently observed levels around 2.8%.

FX market drivers: Zloty marginally depreciated and went above 4.30 vs. EUR. Over the course of the week, the zloty went marginally up, from 4.28 to 4.30 vs. the EUR. The weakening was most likely due to the threat of a renewed trade war between US and China. Local macro releases should not be significant for the development of the zloty this week. We believe that global factors will remain the main drivers, including flash GDP for Germany and retail sales data for the US.

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General information

AuthorErste Group Research
Product nameCEE Country Update
Topic in focusFX, Macro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-
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