The Polish currency seems to be returning to the favor of investors, ending the week strongly strengthened. Thus, the PLN depreciation trend may have been halted, which may also be related to the change of the Monetary Policy Council's announcement.
This week the Council informed that the exchange rate is no longer unadjusted to the macroeconomic situation, and it may affect further economic growth. Hence, PLN could get wind in its sails, as the probability of playing against the central bank has significantly decreased. As a result, USD/PLN fell from 3.98 to 3.82, EUR/PLN retreated from 4.67 to 4.53, and GBP/PLN turned around from 5.48 to 5.22.
We have recently learned that Poland's record low interest rates should be kept unchanged in the coming quarters if the economic recovery continues and inflation approaches the 2.5% target over the next 2 years - this is the opinion of the majority of Monetary Policy Council members.
At the same time, in the opinion of these MPC members, if economic conditions and prospects were to deteriorate significantly, e.g. due to a new intensification of a pandemic, further monetary easing, including interest rate cuts, could be justified.
Some MPC members were opposed to another rate cut even if further monetary easing proved necessary; instead, they favored additional measures to increase business lending. Some members said that considering a rate hike in H2 2021 may be advisable if inflationary pressures increase sharply.
Thus, the zloty could make up for the losses it suffered against regional currencies: the Hungarian forint or the Czech koruna. Nevertheless, the zloty is still far away from other currencies of emerging markets: South Africa, Mexico or Brazil. The currencies of these countries seem to be definitely stronger now.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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