The Polish Zloty faces short-term bearish pressure as cooling October inflation data signals a potential delay in monetary policy tightening by the National Bank of Poland.
The Polish Zloty faces downward pressure following October's flash CPI data, which showed a significant deceleration to 3.5% year-on-year from 4.1% in September. This unexpected cooling, coupled with a 0.3% month-on-month decline in prices, suggests that the National Bank of Poland (NBP) will likely delay its monetary tightening cycle, reducing the yield attractiveness of the currency.
The PLN is weakening because lower-than-expected inflation reduces the pressure on the National Bank of Poland to raise interest rates.
The October flash CPI slowed to 3.5% year-on-year, down from 4.1% in September.
Poland's flash Consumer Price Index cooled to 3.5% in October from 4.1% in September, missing market expectations. The monthly decline of 0.3% suggests inflationary pressures are easing, prompting analysts to push back forecasts for National Bank of Poland interest rate hikes.
The lower-than-expected inflation reading reduces the urgency for the National Bank of Poland to raise interest rates, which typically weakens the currency.