The Polish zloty drifted in choppy rangebound
trading after a short-lived move
higher in early trade on Monday, as coalition
talks between the ruling PiS and the
parliamentary fringe groups got underway in
Poland. The EUR/PLN pair moved south first
thing in the morning in reaction to the
positive results of the general election poll in
Hungary but was eventually unable to hold
to the 3.95 area. A streak of weakness came
after FinMin Zyta Gilowska deemed leftist
Self-Defense (SO) economic demands,
which include the introduction of a turnover
tax and a minimal social payments for the
unemployed, impossible to meet. Gilowska
vowed, that she would try to explain this to
the SO leader Andrzej Lepper, although it
could be that with Lepper already focused
on the deputy PM seat she might in fact
have little explaining to do.
One might see
the zloty’s negative reaction to Gilowska’s
firm response to populist demands as a bit
odd, although it supports our long-standing
view that in the short run the market seems
more concerned with the lack of political
stability rather than the potential implication
of the conservative-populist coalition. Hence,
the zloty might in fact react positively to the
once purely exotic scenario in which Lepper
enters the government. In the meantime
however further gains should capped by the
lack of political clarity and the unfavorable
global sentiment toward emerging fixed
income markets.
The session’s economic calendar is blank so
the market will be driven by global factors
and politics today. At the same time the
3.95-4.00 EUR/PLN should remain the
range both today as well as for the rest of
the pre-holiday week. As if to confirm this
outlook the EUR/PLN pair edged lower late
on Monday where it once again hit strong
support.
(CSOB - Investment research)