Impacts of Pis on polish rates

Recommendation is to short PLN/HUF as a low beta (to global developments) way to trade the unorthodox policy stance in post election Poland. Alternatively, long USD/PLN also expresses the negative developments in Poland alongside an expected expansion in monetary policy easing by the ECB, which will keep NBP policy more dovish still. 

"The ECB is likely to extend QE beyond September 2016 at its December meeting (3 December) and the probability of cut to the ECB's deposit rate has increased as well. An NBP rate cut in Q1 16, after 8 of 10 MPC members are reappointed in January-February 2016, is a possibility", says Barclays. 

The market is pricing a 25bp rate cut by April 2016 and only 38bp over the next 12m. Additionally, the spread between 10y Hungary vs. Poland GB is expected to compress further as additional ECB QE is likely to favour Hungary over Poland given the direction policy is likely to take under the PiS government. Long 10y Hungary GB is advisable.