At the end of the week, however, the Polish currency became more fragile and reacted mostly at times when the dollar was gaining. As a result, while the EURUSD remains virtually unchanged for the week, the Zloty suffered a quite noticeable loss. The USDPLN rose from 2,75 to 2,87, even though it was already below 2,70 in the middle. The EURPLN surged from 3,52 to 3,66.

How this weakness can be explained?  Definitely the decision (to cut rates by 75 bp) of Czech’s central bank didn’t help. The Czech Koruna lost 4,5% to the euro and impaired sentiment in the region. Moreover, markets start to believe that a cut in rates this year is increasingly more likely also in Poland. Although remarks made by members of the MPC varied, a series of bleak macroeconomic data and a decent inflation reading for October (we expect 4,1% yoy vs. 4,5% for September) might eventually convince the majority to act before the growth slows down to ca. 3% next year.

The Polish market may remain volatile for a considerable period as it is vulnerable to the Wall Street erratic stock markets.

Przemysław Kwiecień