The appreciation of the zloty has slowed down. On Tuesday morning the EUR / PLN exchange rate was at the level of PLN 4.5430, and the USD / PLN rate was PLN 4.0050, after yesterday at the end of the day the euro recovered a significant part of earlier losses, and the dollar even slightly adjusted the last sell-off. It is very likely that this is the end of the zloty appreciation and the zloty will again be under pressure from sellers in the second half of January.
The beginning of 2022 was marked by the appreciation of the zloty and other currencies of our region, which was driven by expectations for further interest rate increases in Poland, the Czech Republic and Hungary, and which was a continuation of the trends that began in the last days of November.
As a result, the EUR / PLN exchange rate fell from around PLN 4.72 in November to below PLN 4.53 on Monday and was at the lowest levels in 4 months. The Czech koruna strengthened even more in reaction to the policy of aggressive interest rate hikes by the Czech Bank, which pushed the EUR / CZK rate to the lowest level in a decade.
The appreciation of the region’s currencies should come to an end. At least when it comes to the zloty. Such a scenario is supported not only by the large sell-off of EUR / PLN and USD / PLN, but above all by a significant marginalization of important risk factors, with the simultaneous too strong focus of the market on interest rate increases by the Monetary Policy Council. Yes, the Council will continue to raise rates, but so far the chances that this year they will clearly exceed the level of 3.50 percent. (currently the main rate is at 2.25%), still seem small. And such a level of interest rates will be too low to compensate for the risk of not paying Poland money from the European fund, or the fact of even four expected interest rate hikes in the USA.
With the above in mind, a thesis can be made that the situation on the domestic currency market is ripe for a turning point, and the zloty will depreciate again in the second half of January. All you need is some impulse to change the trend. It may be Wednesday’s inflation data from the US, which will probably strengthen expectations for interest rate hikes by the Fed, while becoming an impulse for the weakening of emerging market currencies. Including the zloty.
Source: ISBnews
