CEE Market Update: Dovish NBP Decision and Zloty Stabilization Amid Regional Sell-Off

CEE: Dovish NBP should not push zloty to weaker levels

Apart from the morning data from Romania and Hungary, the main event on the calendar in the CEE region is the meeting of the National Bank of Poland. After noon we should see the central bank's decision, statement and the basic framework of the new NBP forecast. Governor Adam Glapinski's press conference is scheduled for Friday. In line with the market, we expect rates to remain unchanged and the main focus will be on the new forecast and tomorrow's press conference, in our view. Both can be expected to be dovish in tone. The market has moved significantly in that direction over the past two weeks and is pricing in roughly 100bp of rate cuts by year-end at this point. Thus, the news from the NBP should not come as a surprise to the market though pressure to price in even more rate cuts could be expected.

The Polish zloty joined the sell-off across the region yesterday amid a combination of deteriorating sentiment in Europe, a lower EUR/USD and heavy long positioning in CEE FX especially in the zloty and forint, which lost significantly more than the Czech koruna yesterday. Thus, in the case of PLN, despite the dovish NBP, we should not see much pressure for further weakness today but rather some stabilisation around 4.460 EUR/PLN.