S&P affirmed Polish rating at A-. Inflation rate confirmed at 1.7% y/y in March, suggesting uptick in core inflation. Labor market data and industrial output growth to be released this week, providing pretty complete picture of 1Q19 economic performance. After Easter, we will see retail sales growth. In Eurozone, we will see market sentiment indicators. We expect little volatility on FX and bond market.


This week:

  • March 17: Employment to grow 2.9% y/y in March, while wages expected to go up 7.3% y/y
    Labor market trends have not changed much. Employment growth has maintained its 3% pace in recent months and we expect 2.9% y/y growth in March as well (in line with market expectations). At the same time, nominal growth of wages should arrive at 7.3% y/y. That would suggest slight acceleration of the underlying trend, which has been locked at around 7% for the last half a year.

  • March 18: Industrial output growth expected at 4.1% y/y in March slightly below market expectations.
    The market sees industrial output growth at 4.5% y/y in March and is slightly more optimistic than we are. Growth at around 4% in March, however, would imply that growth of industry accelerated in 1Q19 compared to the previous quarter. Such good performance goes against market sentiment that has been consistently suggesting weaker expansion for more than half a year. A slowdown scenario does not seem close, as our Now Casting model for Poland implies GDP growth only slightly below 5% in the 1Q19.

  • March 18: We see retail sales growth at 5.5% y/y in March down from 6.5% y/y in February.
    We see slightly lower retail sales growth in March compared to February and average growth of nominal retail sales slowing slightly in the first quarter as well. All in all, however, private consumption should remain the main driver of growth. The tight labor market supports high levels of household spending. On top of that, another round of fiscal stimulus is likely to give a further boost to retail sales figures in 2H19.


Last week's highlights

  • S&P affirmed Polish rating at A- with stable outlook

  • Inflation rate confirmed at 1.7% y/y in March.

  • Poland to lower PIT from 18% to 17% as of 2020


Bond market drivers

  • Polish 10Y yields steady at 2.9%
    The long end of the curve was holding steadily at around 2.9% for the whole week. At the same time, 10Y German bunds returned to positive territory, which resulted in a marginal narrowing of the Polish spread vs. Bunds. We do not expect any major changes on the bond market due to local factors, as there should be no major surprises. Inflation increased in March to 1.7%, while growth is expected to remain robust in 1Q19. The monetary outlook remains unchanged at this point.

  • Weekly performance of 5Y bonds (% in EUR)
    The performance of the bond market in the region was mixed last week. Yields went down in the Czech Republic as spreads vs. Bunds have been quite wide already. Such development resulted in the highest total return (in EUR) in Czech Republic. Hungary was on the opposite side. In consequence of increasing yields, Hungary posted a capital loss. Romania also underperformed. In Poland, stability on the bond market led the total return to be determined by FX gains.


FX market drivers

  • Zloty goes below 4.30 vs. EUR
    The zloty stood out slightly among CEE currencies, mildly appreciating last week vs. the euro. The US dollar fell last week which is usually beneficial for the zloty. In the short term, especially, we do not see domestic factors as supporting the local currency. We expect the EURPLN to continue to follow global sentiment.

Download The Full Weekly Focus Poland

This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.

Feed news

Latest Forex Analysis

Editors’ Picks

EUR/USD hits 11-day high despite Eurosceptic parties gaining ground in EU elections

The EUR may remain bid in Europe – more so, as the Chinese Yuan is gaining ground as of writing. That said, trading volumes will be thin on account of holidays in the UK and US. As a result, gains seen today may not be sustainable.


GBP/USD: Recovery remains capped near 1.2750 amid Brexit anxiety

The GBP/USD pair is seen consolidating the overnight surge to 1.2755 levels, as the recovery mode remains intact on the 1.27 handle heading into quiet European trading. 


USD/JPY keeps gains near 109.50 amid light trading

The USD/JPY pair is on the bids near 109.50 ahead of Europe open on Monday. The 110.55/60 resistance-confluence including 100-day simple moving average (SMA) and 23.6% Fibonacci retracement of January to April rise acts as strong upside cap.


The Evolution of Three Issues are Key in the Week Ahead

As May winds down, the light economic calendar will allow investors to take their cues from the evolution of three disruptive forces--trade, Brexit and the US economy.  With actions against Huawei and possibly a handful of Chinese surveillance equipment producers, the US raised the stakes.

Read more

Gold aims to revisit $1289/90 despite UK/US holiday

With the pessimism surrounding global trade developments and greenback weakness joining EU election results, Gold prices are on the bids near $1287.30 while heading into the European session on Monday.

Gold News