MACRO VIEWS: 5 year credit default swaps record multi-year highs
Nearly 55% of Polish exports are consumed by neighboring Euro-area economies making Poland’s economy highly dependent on overall Euro-area economic health. Poland’s current account as a % of GDP is problematic in itself as the -4.5% deficit highlights Eastern Europe’s largest economy’s vulnerability to external risks.
Both growth and inflation are rising at a +4.3% clip while the economy grapples with an unemployment rate of +11.8%. On Thursday, 5yr yields on PLN denominated government bonds recorded multi-month highs around 5.40% and EUR/PLN looked set to test the key 4.50 figure as EZ periphery to core debt contagion fears intensified.
The NBP (Poland’s central bank) directly intervened in currency markets by offering EUR with the intent of supporting PLN but any post-intervention gains were pared back within hours.
Data Watch - 3Q GDP y/y (Nov. 30), NBP Inflation Expectations (Nov. 30), NOV Manufacturing PMI (Dec. 1).
Nearly 55% of Polish exports are consumed by neighboring Euro-area economies making Poland’s economy highly dependent on overall Euro-area economic health. Poland’s current account as a % of GDP is problematic in itself as the -4.5% deficit highlights Eastern Europe’s largest economy’s vulnerability to external risks.
Both growth and inflation are rising at a +4.3% clip while the economy grapples with an unemployment rate of +11.8%. On Thursday, 5yr yields on PLN denominated government bonds recorded multi-month highs around 5.40% and EUR/PLN looked set to test the key 4.50 figure as EZ periphery to core debt contagion fears intensified.
The NBP (Poland’s central bank) directly intervened in currency markets by offering EUR with the intent of supporting PLN but any post-intervention gains were pared back within hours.
Data Watch - 3Q GDP y/y (Nov. 30), NBP Inflation Expectations (Nov. 30), NOV Manufacturing PMI (Dec. 1).
PLN - FX VIEWS: PLN under-performance
- Despite numerous direct intervention measures, EUR/PLN trades back up near pre-intervention levels around the key 4.5000 medium term pivot.
- Poland’s currency reserves have been depleted to around $95bln as the NBP has been actively intervening to keep the public debt as a % of GDP below 55%. Above would pre-set tax increase and spending cuts.
- Euro-zone debt problems aren’t likely to abate any time soon as Germany continues to reject the notion of a single Euro-bond which is likely to keep the zloty under pressure and may see EUR/PLN make an attempt at multi-year highs around 4.9330.
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