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Macro and Vol Commentary 

The Euro has lost momentum in recent weeks, but as we move into the year end, and the probability of a Brexit deal increases, will we see this momentum turn around?


Manufacturing PMI was 50.8, as domestic demand held back the manufacturing sector in October. New orders, output growth was a drag on the sector. However, strong job creating, higher input and an increase in delivery time.

  • Business expectations softened and this is due to the increase in COVID-19 cases
  • Currency weakness in recent months has increased material costs for producers

The national bank of Poland (NBP) kept interest rates unchanged in November:

  • reference rate at 0.10%;
  • lombard rate at 0.50%;
  • deposit rate at 0.00%;
  • rediscount rate at 0.11%;
  • discount rate at 0.12%.

They agreed to continue to purchase government securities, and government-guaranteed debt securities, the timing will depend on market conditions. NBP will also offer discount credit aimed at refinancing loans granted to enterprise by banks.

GDP data for Q3 shows an improvement in business conditions, Y/Y growth declined 1.6% in Q3 but on a Q/Q basis GDP improved 7.7%, following an 8.9% decline in Q2

  • The easing of lockdown restrictions, in conjunction with fiscal stimulus, and accommodating monetary policy increased economic activity
  • Infections have started to rise once again, creating uncertainty about the course of the pandemic and the economy
  • GDP for Poland is $586nb which is $15,421 per capita for the 2019 economy

The labour market has improved, with wage growth rising, especially in the corporate sector. This can be attributed to employees coming back to work

  • As cases rise, we expect employment conditions to worsen, and unemployment to rise if restrictions are re-introduced

Inflation has been increasing, with CPI at 3.1% for October 2020, net food and energy prices increased by 4.2% in the same period versus 2019. On a month on month basis CPI was 0.1%, with net food and energy prices up 0.3% m/m

  • Currency weakness and moderate rises in energy prices since March, could see inflation increase in the near term
  • The NBP suggest that with interest rates unchanged, there is a 50% chance probability that annual price growth will be 3.4 -3.5% in 2020, and 1.8 - 3.2% in 2021
  • With this projection, the NBP model indicated that there is a 50% probability that GDP will range between -4.1% and -3% in 2020 but in 2021 the model expects a range of 0.8-4.5% in 2021 (Narodowy Bank Polski)

For trade, Poland’s balance of payments has remained positive in 2020 despite COVID-19, the current account in Q2 was 5.64% of GDP, capital account 2.99% of GDP, and combined they were 8.64% of GDP

  • The balance of primary income was negative in Q2 at -13,328mln PLN
  • Poland’s main exports in 2018 were rolled tobacco at $3.4bn, Poultry meat at $2.7bn, Iron structured at $2.6bn, Refined petroleum at $2.5bn, and coking coal at $2bn

External debt held by Poland has increased in Q2 2020 to 335,481mn USD from 331,700mn USD. This is a decline from the final quarters of 2019 when gross external debt was 344,589mn USD and 353,962mn USD in Q3 and Q4 respectively

  • Direct investment: Intercompany lending has increased to 97,595mn USD for Q2 2020, up from 95,336mn USD in Q1 2020

Risk appetite has improved following successful vaccine trials, and plans for rolling out the vaccine are put together. European economies have seen an increase in lockdown restrictions which has caused the currency to weaken. The move has been relatively strong in recent weeks causing a rally to 4.45. The increase in risk appetite has seen other currencies rally but PLN has only gone so far. While we do expect the EURPLN to weaken in the long run as Ems and peripheral currencies start to strengthen once again. Poland’s economy will benefit from a resumption in external demand, and fiscal stimulus which we would expect in 2021. We favour selling rallies in EURPLN at this time.

Volatility Commentary 

Macro Comment

We’ve seen a mild pick up in FX macro vols starting this month however vols still remain far off the Nov election high, the main exception to that (as usual) being GBP vols which are being dominated as usual by UK-EU negotiations which again are still not resolved and a final deal or no deal decision to be made before month end.


We’ve seen PLN strengthen post-election and with the recent vaccine news, a trend over the medium term we’d expect to continue as we see macro risk on sentiment gradually increase with vaccine roll outs expected over the next few months/year. With macro risk-on sentiment slowly creeping back we’ve recently seen volatility realise lower than implied and we expect in the medium term for this to continue.

EURPLN 1-month Realised and Implied Volatility

EURPLN Trade Idea

  • Buy 3m EURPLN Put option in 10m EUR strike 4.4500 for 93k EUR
  • Sell 3m EURPLN Call spread in 7.5m EUR strikes 4.5500, 4.7000 for 50k EUR to reduce long vol expiry for potential lower volatility in the medium term
  • Total Structure cost circa 43k EUR

Charts and Tables 

FX Expiries

Volatility Grid

Historical Spot FX Volatility (30D Rolling)

FX Matrix (today)

Weekly Change

Key Events & Releases

Technical Analysis 

JP Morgan Global FX Volatility 

The index has weakened below the support level of 8.06; the market closed at 8.04. The fall below the 8.00 level could pave the way for a challenge at 50 DMA. The MACD diff is negative and diverging, suggesting further downside pressures for the prices. On the other hand, RSI dipped marginally lower and %K stochastic broke above the %D – a buy signal. On the upside, the index needs to gain a footing above yesterday’s high of 8.11, which could set the scene for 200 DMA. The indices paint a mixed picture, but if the index corrects to the upside and fails into previous day support, we could see prices trend lower.


Dollar Index

The index has improved in the recent sessions and has breached resistance at 91.00 and closed at 91.10. The stochastics are rising, with %K/%D converging, which is a signal of waning buying pressure. The MACD diff is positive and diverging, suggesting we could see a push higher in the near term. The index needs to hold above the 50 DMA levels before it could target the 161.8% fib level at 91.20. On the downside, the break below 90.70 could pave the way for a 90.50 support. The moving averages are edging lower, and a break above them could set the scene for bullish momentum.



The index has weakened yesterday, falling below the 4.44 support level to close at 4.43. The prices have found support at 4.41. The stochastics are seen rising, with %K/%D crossing into a buy signal. The MACD are negative and converging on the upside, supporting the outlook for a change to bullish momentum. On the upside, the break above yesterday’s highs could set the prices to test the 50 DMA. Conversely, to confirm the outlook for lower prices, the index needs to take out the key support at 4.41, which would signal a strong bearish momentum. A breach of this level could trigger a test at 4.40 and 4.38.



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A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

Please contact the author should you require a copy of any previous reports for comparative purposes. Furthermore, the information in this report has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Data in this report has been sourced from Bloomberg unless otherwise stated. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.

This report is not subject to any prohibition on dealing ahead of the dissemination of investment research. Accordingly, the information may have been acted upon by us for our own purposes and has not been procured for the exclusive benefit of customers. Sucden Financial believes that the information contained within this report is already in the public domain. Private customers should not invest in these products unless they are satisfied that the products are suitable for them and they have sought professional advice. Please read our full risk warnings and disclaimers.

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