The Polish zloty shed approximately 0.5% to the euro to trade at 3.5530 EUR/PLN at the closing on Tuesday

The Polish zloty shed approximately 0.5% to the euro to trade at 3.5530 EUR/PLN at the closing on Tuesday as political worries slowly started to weigh on markets ahead of the attempt to dissolve the parliament later this week. Polish MP’s will vote on the dissolution motion on Thursday afternoon, a day earlier than previously indicated. Meanwhile the liberals repeated that they would not agree to call for earlier elections in May and appealed for PiS to withdraw the proposal. However, the conservatives refused to do so which means that the vote will almost certainly go along as planned, even though the fate of the motion seems sealed since the Civic Platform’s backing is needed for the Sejm to shorten it’s term. Just before the end of trade the zloty tried to break past the 3.95 EUR/PLN mark, where it encountered strong resistance.

Political jitter push zloty lower again Political tensions should keep the market on edge at least until Thursday, hence more downward pressure on the zloty be expected today. It may lead to a deeper sell-off which could end at 3.9750 or even 4.0. Regardless of what happens today we uphold our view that due to domestic politics the 3.95-4.00 range is the near term target for the EUR/PLN.

(CSOB - Investment research)