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On Monday, investors analyzed reports regarding the possible resumption of USA–Iran talks, but the lack of new reliable information limited the impact of geopolitics on asset valuations. The zloty weakened only marginally against the euro and dollar, and the EURUSD rate remained near 1.17. In the domestic bond market, SPW yields rose by 4–6bp, following a moderate rise in U.S. Treasury and German Bund yields.
Despite Brent oil prices staying above $100 per barrel, markets still assume the possibility of a diplomatic resolution to the conflict, which limits the scale of risk aversion growth.
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On Tuesday, investors may already position themselves ahead of the upcoming ECB, Fed, and BoE meetings later in the week.
We assume that in the absence of a breakthrough in the Middle East, EURPLN and USDPLN rates will remain in their current consolidation ranges. In the FI market, the base scenario remains stabilization of yields with relatively low volatility.
A sharper decline in yields would require unlocking transport routes in the Persian Gulf.
Today in the U.S. spotlight will be the Consumer Confidence Index reading from the Conference Board, which in April likely fell, following the Michigan University index. Further on will be real estate price data from February.
In the region we will focus on the MNB meeting, which will likely keep interest rates unchanged. In the face of heightened uncertainty due to the fuel shock triggered by the U.S. and Israel’s war with Iran, we expect a continuation of the wait‑and‑see strategy, both today in Hungary and tomorrow in the U.S. and on Thursday in the eurozone and UK. The meeting in Hungary will be the first after parliamentary elections. A change in the ruling camp attracts capital to Hungary, affecting monetary policy conditions.
In Poland the Council of Ministers will address the draft report on the implementation of the medium‑term budgetary‑structural plan for 2025‑28 and the draft multi‑year macroeconomic assumptions for 2026‑2030.
Additionally, the ECB President, Ch. Lagarde, will speak.
On Monday the zloty weakened slightly against the euro and dollar, around 4.25 to EURPLN and 3.6250 to USDPLN.
In base FX markets the dollar was stable, and the EURUSD rate hovered around 1.1720.
The zloty – like other CEE currencies – behaved relatively steadily during Monday’s session. Investors tried to price the probability of resuming USA–Iran talks that could lead to a peace agreement in the Middle East.
In the absence of new reliable information in this area, no significant market impulses emerged from that direction.
Low volatility was also helped by a very sparse macroeconomic calendar. As a result, the zloty pairs we observed remained in local consolidations, limited ranges 4.24–4.25 to EURPLN and 3.61–3.64 to USDPLN.
On Tuesday the local macroeconomic calendar remains empty. In the region the decision will be made by Hungary’s central bank, and we do not expect a change in interest rates. Global investors will likely position themselves ahead of the scheduled central bank meetings later in the week (ECB, Fed, BoE).
We assume no rate changes, but the key will remain the rhetoric of monetary authorities, considered in the context of assessing the impact of tensions in the Persian Gulf on macroeconomic prospects and the future path of rates.
We expect that in the case of no breakthrough in the Persian Gulf, the zloty on Tuesday will remain stable, which should mean maintaining EURPLN and USDPLN rates in their current local consolidation ranges.
On Monday SPW domestic yields rose by 4–6bp. In the 10‑year segment yields rose by 6bp to 5.68%, while on base markets U.S. Treasury and German Bund yields rose by 3bp to 4.34% and 3.04% respectively.
The past weekend, on one hand, through the failure of planned talks in Pakistan, highlighted the difficulties and divergences in the diplomatic process around the war in Iran. On the other hand, reports of a new Iranian initiative and the U.S. readiness for talks confirmed that both sides of the conflict are still seeking a peaceful solution. This did not stop the upward trend in the oil market, especially since the Strait of Hormuz remains effectively closed, but prevented a sharp price jump. Combined with a relatively positive investor outlook on diplomatic success, this translated into calm trading in the interest rate market on Monday.
With Brent staying above $100 per barrel – on Monday about $107 – it is still hard to speak of a basis for a lasting downward yield move. Positive market sentiment reflects relative stabilization of yields near current levels on base markets, and in the domestic market only a slight upward move. A noteworthy trend – and positive from the perspective of assessing appetite for Polish SPW – is the tightening of the asset swap spread on the long end of the curve, visible since early April.
We believe that the environment of weakening SPW yield momentum and stabilization around current levels, with relatively low volatility, will also persist during the Tuesday session. A decline in yields, when it occurs, will be jumpy and linked to a scenario of breaking the stalemate around the Strait of Hormuz blockade.
