Time to Take Profit on Long Polish Zloty Positions

In 2009 Poland’s economy outperformed regional peers and the EU as a whole, growing 1.7%. However, signs point to a negative growth surprise in Q1 2010. Consumers proved resilient throughout last year’s downturn, but recent indicators suggest they are tightening their belts. Given the dimmer private consumption outlook, RGE believes the National Bank of Poland (NBP) has no scope for rate hikes in 2010. Moreover, the chances of a rate cut have risen. We now assign a 30% probability to this scenario. This change in the rate outlook should provide additional support for short-rate receivers in Poland.