ING’s Frantisek Taborsky highlights persistent Polish Zloty weakness versus Central and Eastern European (CEE) peers as EUR/PLN breaks above its prior range toward 4.290. He attributes vulnerability to the National Bank of Poland’s (NBP) dovish stance and global risk-off conditions. ING’s models see current levels as fair, but risks remain skewed to higher EUR/PLN, with 4.300 flagged as strong resistance.
Zloty underperformance and higher EUR/PLN risks
“The Polish zloty continues to underperform its CEE peers. Over the past two weeks, EUR/PLN has moved from its previous 4.230-4.260 range to levels above 4.290 yesterday, the highest since the start of the US-Iran conflict in March. As we discussed here previously, the zloty has become the region’s most vulnerable currency due to the dovish tone of the National Bank of Poland. Global factors have added to this pressure in recent weeks, with a stronger US dollar and weaker risk sentiment weighing on the currency. Overall, there is little to suggest an early turnaround in EUR/PLN.”
“In our models, levels around 4.290 have closed the gap between rates and FX that had been widening since mid-June, suggesting fair levels currently. The market has priced out almost all rate hikes and now expects rates to remain broadly unchanged over the next six months, with only about a 50% probability of one hike over the following year. This is significantly less than for comparable peers such as the Czech Republic or the broader EM space, excluding outliers such as Hungary or Israel with strong idiosyncratic stories.”
“For now, the NBP’s tone is unlikely to change, with the next potential trigger being the June inflation print next Tuesday. However, forecasts do not point to a significant upside surprise, while recent data, especially weaker wages, should keep the central bank comfortable. We therefore continue to see risks skewed towards a higher EUR/PLN, although 4.300 should remain strong resistance and help keep the move contained. Otherwise, further zloty weakness could prompt the NBP to reassess its current stance.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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