GBP: Temporary Reduction In Risk Premia

PLN: No change in rates, bigger focus on the FX mortgage story

No change in interest rates is expected from the National Bank of Poland today. Despite the risk of CPI temporarily overshooting the NBP's inflation target upper band (CPI above 3.5% YoY) in 1Q20, our economists expect the guidance on interest rates to remain unchanged. Rather the focus should be on the European Court of Justice's ruling regarding FX mortgage loans. Previously, several MPC members communicated the need to lower capital requirements. Here, the chairman's opinion should be crucial for the final recommendations to the Committee of Financial Stability. The FX mortgage story is the key risk for the Polish zloty and we look for EUR/PLN to re-test the 4.40 level in coming months if local banks start to pre-emptively hedge their FX exposure.

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