Poland's Q2 GDP data were weaker than expected

Poland's Q2 GDP data were weaker than expected, but core inflation accelerated to 0.4% y/y as expected. Following the GDP data, the zloty sold off hard in anticipation that NBP may soon signal renewed rate cuts - PLN-HUF declined to below the key 74.00 threshold at one point - but the zloty recovered sharply by the European close. The GDP data were dovish but not enough to re-open the easing cycle. 

What one would need is fresh panic about deflation triggered by China. But since Polish core inflation accelerated from 0.2% y/y to 0.4% y/y, we would need to see Chinese devaluation continue and commodity prices keep falling before NBP would accept this as the trend - quite to the contrary, PBoC commented that devaluation is done for now. 

"On balance, we view the events as monetary policy and zloty neutral and expect EUR-PLN to trade back near 4.15 in coming months," says Commerzbank.