This week, the zloty was again gaining to the euro, where the euro fell to its lowest level since the first half of March, i.e. from the moment the epidemic hit the financial markets. Thus, the euro cost 4.34 zlotys compared to almost 4.70 in September. The scale of the appreciation of the Polish currency seems to be quite significant, as in the time when it takes place. The last time we observed such a rallya in the PLN against the EUR was observed between February and May 2022, when the euro exchange rate went back from around the level of five zlotys.
The zloty also gained in relation to the US dollar, where the combination of domestic and international factors positively appeared to affect the PLN. We are talking about the decline in the yields of US bonds at the end of October, which further translated into a weakening of the USD. As a result, the zloty seemed to be supported by both national and international factors. The dollar fell from 4.45 in September to 3.97 this week. Taking into account the time and scope of the exchange rate, the last time such a dynamic of changes was observed between October 2022 and November 2022. Then the dollar fell from the level of 5 zlotys to 4.51. Therefore, as it can result from the above, the current rate and scale of the appreciation of the zloty does not happen very often and after such periods usually comes a greater calming.
In the current state of the market, you can ask yourself how much more has to discount domestic factors and how much will start to depend on global factors. If it comes to them, the market plays quite hard under interest rate cuts in developed economies in 2024, which also seems to help the markets of emerging economies.
Currently, the expectations are that the Fed would cut its interest rate by 0.9pp by the end of 2024, the ECB by 0.76 pp, and the Bank of England by 0.57 pp. Such expected changes seem to fuel the appetite for risk and reduce fears of a further increase in bond yields. This, in turn, seems to create the so-called relief rally on many asset classes, including shares or bonds. In the case of Poland, as previously mentioned, a domestic factor has reached in October, which may be slowly extinguishing, and from global factors perhaps too optimistic about the possibility of interest rate cuts.
Author: Daniel Kostecki – CMC Markets Poland
