Thursday is another day of zloty strengthening. The rate of the euro dropped from PLN 4.21. According to Miroslav Budzicki, financial markets strategist at PKO BP, a further decline in the price of the euro cannot be ruled out.
On Wednesday, the EUR/Zloty exchange rate broke below the PLN 4.25 barrier, which is important from the point of view of technical analysis. On Thursday afternoon, one euro was even lower than PLN 4.21 for a while.
The euro is the cheapest it has been in years
– The euro rate is currently the lowest since the beginning of 2020. But further strengthening of the zloty is possible. Of course, the level of PLN 4.2 will form some obstacles, although this is more psychological resistance. But from a purely technical point of view, the next strong resistance is PLN 4.13-4.15 per euro. These quotes are from 2018 and this is the level we are talking about – said Miroslav Budzicki, an economist at PKO BP.
In his opinion, several factors influenced the movement of the zloty, but the zloty remained stable for several months. He noted that since the beginning of the fourth quarter, there has been a sharp rise in the dollar, which has resulted in a decline in emerging market currencies.
– In Poland, this action led to the devaluation of the zloty at that time to PLN 4.38 per euro, but it prevented the scale of the weakening of our currency, with such a rate of the zloty, the Ministry of Finance could decide to sell foreign currency entering our country. . Usually, it works like this: either the Ministry of Finance decides to sell currencies, which limits the devaluation, or investors become more cautious, fearing the Ministry of Finance’s actions – explained the economist of PKO BP.
However, as he noted, after that the zloty weakened and as a result, already in December the market tested the level of PLN 4.25 per euro. According to Budzicki, this means that the zloty remained stable during the period of turmoil related to expectations of a change in US economic policy under the newly elected Donald Trump administration.
What do you like about Polish money?
– In addition, the zloty was supported by the fact that the National Bank of Poland maintains high interest rates and at least a moderate, if not aggressive, position that maintains or deepens the interest rate gap between Poland and other countries. This position was highlighted in December and January by changing speeches from NPBP President Adam Glapinski. While in October and November the president talked a lot about the possibility of a rate cut in the first half of 2025, recently he stated that this scenario is unlikely and that a rate cut is possible next year – said a PKO BP strategist.
The economist admitted that the state of the bond market in our country could also affect the strengthening of the zloty. Due to the great borrowing needs of our country, the Ministry of Finance is selling large tranches of bonds.
– This is definitely not a dominant factor, but we have been observing for several months that the portfolio of debt securities in the hands of foreign investors is growing. In addition, capital from abroad can flow into the stock market, which has recently grown, and funds from abroad can also flow into the money market, Budzicki said.
He emphasized that these factors were not enough to break the level of PLN 4.25 per euro until an impulse appeared from the US. This momentum, among other things, was revealed by data on lower-than-core inflation, which increased market expectations of a rate cut in the US.
– As a result, the dollar weakened and US bond yields fell, and demand for riskier assets increased, resulting in emerging market currencies. The Polish zloty also benefited from this, said Miroslav Budzitskyi.
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