The Polish zloty got off to a weak start on Wednesday after slipping past the 3.95 EUR/PLN mark overnight and extended losses in early trade as investors continued unwinding their positions in the entire region ahead of the general elections in Hungary and the attempt to call on earlier elections in Poland today. Within an hour of the opening the PLN hit a 20-week low against the euro at 3.9860. A choppy technical trade continued late into the morning as it took the market some time to calm down after the failed attempt to break past 3.99. The zloty eventually returned to pre opening levels and ended the session in the 3.97 EUR/PLN area underpinned by the positive undertone of the agreement struck between the government and Italy’s Unicredit concerning the Polish branch of the pan-European merger with HVB.
The parliamentary proceedings and the ECB will be in the center of attention today. Samoobrona’s entry into the government, together with its leader, Andrzej Lepper, has given rise to a certain amount of concern from the financial markets and as we believe has already been discounted by the market. Hence the potential alliance with ruling PiS should not incite an intense reaction from the zloty. We maintain our view that even if the sell-off continues today strong buying can be expected at around 4.0 EUR/PLN, which will help keep the zloty traded in the current 3.95-4.00 range throughout the session.
(CSOB - Investment research)