The Polish market got off to a shaky start of the day on Thursday gently hit by fears that the parliamentary crisis which left political commentators and financial markets dumbfounded on Wednesday afternoon could eventually lead to early elections. Late on Wednesday in the absence of PiS deputies the Sejm attempted to pass a notion which would compel the Parliament to vote on the budget act on Saturday (as previously planned), compared January 24 proposed earlier that day by PiS. Within minutes of the opening the EUR/PLN pair found itself testing the 3.8 EUR/PLN resistance, but was eventually unable to move higher past the well established psychological threshold. By the noon tensions eased, as it became more and more obvious that Wednesday’s events were merely a political game played by LPR and Samoobrona and that in reality opposition parties, although determined not to give president Kaczynski the possibility of dissolving the parliament, would not insist on holding the budget vote this weekend. The Polish zloty inched up by 0.3% later in the day thanks to PO and PiS leaders who indicated that they had moved closer to a coalition agreement. Donald Tusk (PO) and Jaroslaw Kaczynski (PiS) were reluctant to explicitly use the word “coalition”, but both admitted, that their meeting on Thursday helped clarify unresolved issues between the two wrangled parties and was as such a step in the right direction. The apparent revival of coalition talks between the two main political forces in the Sejm continues to weigh positively on the zloty, offsetting any downbeat news concerning the budget debate.
The zloty has not been particularly vulnerable to the potential threat of earlier elections but these, according to opinion polls, would not bring about a significant change in the political layout. We believe that the Polish currency will remain in wait and see mode at least until the troublesome budget timetable is dealt with. However the zloty will continue to react in a very bullish way to signs that PO and PiS are getting closer to a coalition agreement. With politics overshadowing the market the first batch of eco figures this month is likely to have little impact on the zloty – particularly since our expectations concerning the C/A data are pretty much in line with the market consensus.
(CSOB - Investment research)