Last week brought a major negative surprise, as industrial production growth decreased by 1.3% y/y in August. We see considerable risks to our FY19 GDP growth forecast if the now-cast prediction of 3.8% growth in 3Q19 materializes. This week, the unemployment rate for August will be published, and it should arrive at a record-low 5.2%. Bond and FX markets are under the influence of PMI and Ifo indices for the Eurozone and major member countries.

 

This week:

  • September 24: Unemployment rate to stay record-low

We expect the unemployment rate to arrive at 5.2% in August, unchanged from the previous month. The situation on the labor market remains favorable, with wage growth fluctuating around 7%, employment growth slightly below 3% and record-low unemployment.

  • September 26: MPC meeting minutes to maintain dovish rhetoric

The NBP will publish the minutes from September's MPC meeting. The MPC kept the policy rate unchanged at 1.5% and reiterated its dovish stance. However, it pointed out that external risks to growth have intensified. We expect the policy rate to remain stable until the end of 2020 and beyond.

 

Last week's highlights

  • Wage growth came in at 6.8% y/y in August, while employment growth arrived at 2.6% y/y.

  • Industrial production surprised visibly to the downside, as it decreased by 1.3% y/y in August. The slowdown in global manufacturing transmitted into Polish industry and the negative calendar effect (-1WD) added further pressure.

  • Retail sales increased by 6.0% y/y in August, maintaining solid growth dynamics.

  • In light of the August data, we see considerable risks to our FY19 growth forecast, as our now-cast model suggests the growth moving toward 3.8% in 3Q19.

 

Bond market drivers

  • 10Y yield holds above 2%

Over the course of the week, core market developments and weaker local macro data weighed on the long end of the Polish curve. While the 10Y German Bund went down by almost 10bp, the 10Y Polish yield decreased by 12bp. As a result, the spread vs. the 10Y German Bund fluctuated between 255bp and 260bp. This week opened with a strong negative surprise, as the preliminary PMI Index for manufacturing in Germany in September plummeted to 41.4, the lowest level since the 2012 recession. Thus, the Polish long end might follow the German market and dive as well. This week, local releases will be neutral for the bond market.

  • Weekly performance of 5Y bonds (% in EUR)

Yield developments mostly followed that of the German Bund or even declined more (namely in Hungary and Poland). The Czech 10Y yield stayed flat, which could be underpinned by the relatively hawkish comments from rate-setter Holub last week. In Romania, yields on longer-dated bonds went up more, amid three consecutive rejections of all bids at bond auctions by the MinFin recently, as demand was low.

 

FX market drivers

  • Zloty weakened sharply

The zloty paired all recent gains and depreciated by 1.2% vs. the EUR and closed the week above 4.37 vs. the EUR. We think that the recent weakening was mostly driven by the FED decision and US dollar strengthening. The disappointing performance of Polish industry did not have a significant impact on the zloty. As for this week, PMI indices for the Eurozone and major member countries will be the most important releases for the EURUSD. In our view, the EURPLN might remain at an elevated level and hover around 4.35 in the coming weeks.

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.

Analysis feed

Latest Forex Analysis

Editors’ Picks

AUD/USD: Bears in control. 11-year low back in sight amid coronavirus-led risk-off

AUD/USD stalls its recovery attempts near 0.6625 region, as the bears remain in control amid broad risk-aversion induced by growing coronavirus contagion. The spot now heads back towards the 11-year low of 0.6583 reached earlier today. 

AUD/USD News

USD/JPY struggles to keep gains above 111.50 amid risk-off

USD/JPY is trimming gains as yen sellers are struggling to absorb buying pressure amid risk-off mood in the financial markets. Investors are selling risk, possibly in response to reports stating a rise in the number of coronavirus cases outside China, especially in South Korea and Italy. 

USD/JPY News

USD/KRW rises to six-month high as coronavirus spreads into South Korea

USD/KRW remains 0.67% up to 1,217.50 by the press time of early Monday. In doing so, the pair stays near the highest levels last seen during the late-August 2019 and the reason to blame is the outbreak of coronavirus (COVID-19) in South Korea.

Read more

Gold: Better bid after biggest weekly gain since August 2019

Gold is on the offensive, having logged its biggest weekly gain in six months last week. The yelloe metal rallied by over 3.7 percent last week to print its best weekly performance since August. The bias remains bullish despite overbought readings on key indicators.

Gold News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex Majors

Cryptocurrencies

Signatures