Activity rebounds strongly in Central Europe

The rebound in retail sales and industrial production across Central and Eastern Europe in May as lockdown measures were lifted supports our view that the region will experience a relatively strong economic recovery in the second half of this year. Looking ahead to next week, we expect Poland’s central bank to leave interest rates unchanged at Tuesday’s MPC meeting but we’ll be paying close attention to the accompanying communications for any signs that the NBP has strengthened its language around its preference for a weaker zloty. We think the central bank has been signalling its intention to weaken the currency and measures are likely to be stepped up later this year, including a more aggressive expansion of its asset purchases and intervention in the foreign exchange market.