Polish headline inflation likely to remain positive in early 2017 given USD/PLN stays at recent high

The annual headline inflation in Poland should move further into positive territory at the beginning of next year, especially if oil prices and USD/PLN pair stay at recent high levels.

For December, the year-on-year change of Polish consumer prices index will be clearly positive (estimate stands at 0.2 percent y/y at the moment), KBC Central European reported.

The Polish inflation matched expectation as the headline index was unchanged from a year ago in November, which marks the end of deflation period in Poland. Nevertheless, the EUR/PLN is a key driver of the price action in regional forex markets, while the pair is now facing a key technical resistance at the EUR/PLN 4.4616 level. Should the EUR/PLN broke above this resistance level, the pair will be heading to the 4.50 area.

Regional currencies, including the Czech koruna, have continued to be under selling as the EUR/PLN pair reached fresh four-month highs. Interestingly, just a few minutes before 5 p.m. yesterday the EUR/HUF suddenly popped up to 313 without any particular reason, and slide back to 312 this morning.

"The annual headline inflation in Poland should move further into positive territory at the beginning of next year, especially if oil prices and USD/PLN pair stay at recent high levels," the report said.