Poland Weekly Focus | Presidential election could change political landscape

Erste Bank Research Team Erste Bank

Unemployment rate for May should land at 6%. First round of presidential election to take place this week.

June 24 | Unemployment rate to increase in May. Last week’s data showed further deterioration of labor market conditions, with slowing wage growth and dropping employment. However, the drop in employment in absolute terms (thousands, m/m) was lower compared to April. However, the unemployment rate, as reported by the Ministry of Family, Labor and Social Policy, increased only marginally, to 6.0% in May.

June 28 | First round of presidential election. The first round of the presidential election will take place on Sunday. The election was rescheduled from mid-May due to the outbreak of the coronavirus. The latest poll shows President Duda with high levels of support in the first round, although not high enough to guarantee victory. He is thus likely to meet the opposition candidate in the second round, which is scheduled for July 12. Should President Duda not secure reelection, the political situation for the current government will become more complicated.

Bond market drivers | Long end of curve followed core markets. Over the course of the week, the 10Y yield mirrored the development on core markets. In the first half of the week, the 10Y yield went up 15bp to 1.45% before dropping towards 1.3% in the rest of the week. As a result, the spread over the 10Y German Bund remained broadly stable at around 180bp. With no major macro release scheduled for the remainder of this week, we expect the bond market to focus on core market developments. This week, the National Bank of Poland will hold its second outright-buy operation this month.

FX market drivers | Mixed signals for zloty. Mixed signals from the central bank and Ministry of Finance impacted the zloty. Ahead of the central bank meeting, the zloty appreciated and went shortly below 4.40 vs. the EUR. However, concerns from the central bank that the recent strengthening of the zloty could dampen recovery prospects, took a toll on the EURPLN, which went sharply up and returned above 4.45. On the other hand, the MinFin commented that, from the perspective of fiscal policy, further appreciation of the zloty would be desirable. The contradictory comments resulted in increased volatility for the zloty at the end of the week.

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Erste Bank Research Team

Erste Bank

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