The Polish zloty hit new week-long highs at 3.9110 EUR/PLN in a lackluster, technical session on Tuesday, before eventually retreating to the pre-opening area around 3.94 EUR/PLN. With the political merry-go-round gaining speed slowly the bond tender and C/A data got most of the attention, and both proved almost equally uninspiring. The broader-than-expected C/A deficit (EUR -538 m.) triggered a gentle negative reaction from the zloty but a closer look at the data revealed a positive undertone namely, strong exports. They increased by over 18% in y/y terms compared with the 17% y/y growth in imports, which in fact was also quite healthy, although slightly below our expectations. This is evidence that the Polish economy is performing well on the domestic and particularly on the foreign front. With the trade balance at only EUR -8 m. (compared with our EUR -100 m. estimate) the broader C/A gap was caused mainly by the significantly smaller than expected surplus in the balance of income. It’s worth emphasizing though that the large correction of last months’ data makes interpretation risky and raises obvious doubts concerning the quality of the NBP data.
Follow ing a healthy start to the week the zloty clearly lost momentum on Wednesday, and we believe traders might continue gently pulling out of the market ahead of the Easter weekend. Higher liquidity, large trades and potential further gains will probably be put off till after the holidays.
(CSOB - Investment research)