Violiality griped the global market following the UK’s decision to leave the EU. As expected, the Polish złoty suffered the most from the shock, making Poland’s Finance Ministry cancel a bid of the country’s government bonds to foreign investors almost immediately. Analysts agree that Brexit is bad news for all EU markets but add that the effect should only be temporary.
According to Fidelity, European businesses with British capital may slow investment activity until uncertainty over future EU-UK relations eases. They also expect EU-UK exports to slow significantly in the medium-term, and the European Central Bank may consider buying back its assets in order to minimize the Brexit’s long-term risks.
Przemysław Kwiecień, chief economist of XTB, warns the worst is still ahead, as the market had not been prepared for this scenario. He expects a series of negative recommendations for the Polish złoty from global banks. The move will also strongly affect Poles with Franc-denominated mortgages, as investors will look for safety in strong currencies, like the Swiss franc or US dollar. “We’re holding our breath before some coordinated, wide-scale intervention from the central banks,” he says but adds that none of them has made any move towards establishing a common policy yet.
Another side of this, observers point out, is that since the UK was one of the biggest contributors to the EU budget system, Poland will not see its €106bn EU funding planned for the next 10 years.
