Zloty to follow EUR/USD until rate council decides its fate, T-bonds also look to MPC
The zloty will likely follow the EUR/USD exchange rate until the decisions to be taken by Poland's Monetary Policy Council (MPC) give a direction to both the FX and FI markets, local players told PAP.
"The zloty will be dependent on EUR/USD exchange rate and on global developments until next month, when the MPC will exert its influence on the zloty," Kredyt Bank FX dealer Robert Kesicki told PAP.
"The interest rate cut has been practically decided given the comments of NBP chief Marek Belka: the question remains how big of a cut it will be and whether the statement will point to a whole cycle of cuts," the dealer said.
The zloty may undergo a deeper correction if the council announced the start of a rate cut cycle or a rate cut by 50 bps in November, according to Kesicki.
The bond market will be sensitive to rate setter comments and external factors, Pekao economists said in their daily research.
"Investors will be waiting for signals from MPC members," Pekao economists said." The priced-in interest rates expectations are big, which in case of a more cautious attitude of the MPC may bring a correction [bond yields increase]. The Tuesday bond auction showed that there is still interest in long-term debt despite record lolw yields and the sale of the new benchmark is a good sign."
On Wednesday Poland sold PLN 2.7 bln OK0714 bonds at the demand of PLN 3.5 bln and yields reaching 3.85% and PLN 5.13 bln DS1023 bonds at the demand of PLN 6.54 bln and yields reaching 4.49%.