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In Poland, the stronger activity and CPI data unlikely to shift NBP from its wait-and-see stance.
We expect the NBP to maintain interest rates unchanged at 1.5% in its first meeting of the year while reiterating its preference for the stable monetary policy through 2017 and rate hikes starting in 2018.
The strong rebound in headline inflation in December (to 0.8%oya from 0%) broadly validate the NBP’s strategy of sticking to its wait-and-see stance through the soft patch in Q3’2016. Polish consumer prices are expected to increase by 0.8 percent year-on-year in December 2016 after showing no growth in November and beating market consensus of a 0.5 percent gain, the preliminary estimate showed.
While in Czech Republic, inflation likely picked up again in December, increasing focus on EURCZK peg.
Czech inflation likely moved closer to the CNB target in December, rising to an estimated 1.8%oya from 1.5% in November. Non-core prices led the projected acceleration, due to both base effects and month-on-month price increases. Retail surveys suggest petrol prices rose around 1.1% in December, driven by the increase in the Brent oil prices after the OPEC agreement as well as koruna weakness versus the US dollar, mirroring the move in EURUSD.
The only exception has been Norway; the Norwegian rate of inflation has eased from 4.4% in the summer to only 3.5% recently.
In outright trades, we hold:
Long USDPLN and Long 23-Feb-17 EURPLN 1x1 call spread (4.45, 4.60), spot ref: 4.3695.
Short 27-Nov-17 EURCZK forward at spot reference 27.0180.
While at spot reference: 9.0775, one can deploy EURNOK diagonal credit put spreads by writing 1w (1%) in the money put while initiating longs in 1m at the money put, the structure could be constructed at net credit.
