Despite softening, busyness sentiment in regional industries remain strong

After hitting a one-month low against the euro on Friday, the Polish zloty takes back some ground and at the moment of writing of this note is seen just shy above EUR/PLN 4.05. On Friday, the depreciation was clearly amplified by an absence of local traders due to Labour Day holiday (market volume is usually twice as high compared to last Friday).

Regarding the fresh regional PMI data for April released today, it showed a slightly worse conditions in comparison with the month before. In Poland, the headline index fell for the third straight month and in April reached 54.0 points (expectations were for a milder decline to 54.6 points). Although this was the weakest reading in eleven months, the index still signals quite strong improvement in overall conditions in industry (see the chart below). Most notably, the survey showed that positive trends in the labour market should continue in months ahead. In other words, today’s data are in line with last month’s strong releases which means that the Polish central bank will likely confirm it is happy with its current policy and will keep interest rates unchanged later this week.

As for the Czech index, it also showed some deterioration vis-a-vis March but the index still stays well above a ‘neutral’ 50 points threshold. The survey pointed to rising cost pressures. This was, however, primarily related to the strengthening US dollar. The Czech National Bank (CNB), which is to conclude its meeting and release its new forecast on Thursday, would certainly have appreciated if the price pressures stemmed rather from rising wages (which will probably be the most interesting part of the forecast to be released).