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2020/09/28 / Erste Group Research

Poland Weekly Update | Did market sentiment worsen?


Sentiment indicators for September will be in focus this week, with manufacturing PMIs and ESI to be released. This should indicate the impact of rising new infections on economic activity. Headline inflation should ease to 2.8% y/y in September. The zloty should follow global factors.

October 1 | The market expects PMI to increase in September. After a somewhat disappointing reading in August (at 50.6), the market expects manufacturing PMI to arrive at 52.5, reflecting the solid performance of industry in Germany. The recent rise in new COVID-19 cases in Europe has been weighing on the performance of the services sector, but manufacturing has not yet been impacted. Local sentiment indicators also improved marginally in September.

October 1 | Inflation to drop in September. We expect inflation to continue its downward movement and drop to 2.8% y/y (-0.2% m/m) in September, while the market consensus stands at 3.0% y/y. In our view, dropping services prices, as well as the further easing of food prices, will drag the headline number down. We expect core inflation to land at 3.9% y/y in September (down from 4.0% y/y in August). All in all, we see inflation on average at 3.3% this year before easing to 1.4% in 2021.

Bond market drivers | Increased volatility on long-end. Over the course of the week, the long end of the curve has been more volatile, as the 10Y yield moved between 1.28% and 1.36%, mirroring core market developments. As a result, the spread over the 10Y German Bund remained unchanged at around 180bp. On Wednesday this week, the MinFin will announce the bond supply for October, which could be limited, given the comfortable financing of the borrowing needs. Moreover, the NBP should announce the date of October’s QE operation.

FX market drivers | Global factors pushed EURPLN above 4.55. Over the week, the zloty depreciated by around 2% against the EUR and the EURPLN went up sharply to 4.55. The increase in global risk aversion that resulted in the sell-off of emerging market currencies, and the strengthening of the US dollar, weighed on the zloty. Furthermore, the unexpected hike of deposit rate by the Hungarian central bank could also have weighed on CEE currencies. This week, the global macro release will be in focus.

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General information

AuthorErste Group Research
Date2020/09/28
Languageen
Product nameCEE Country Update
Topic in focusMacro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-
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