The Polish zloty extended losses against the euro by just over 0.5% in early trade on Wednesday as the already shaky sentiment toward emerging markets was undermined by Tuesday’s rate hike and statement by the Fed. However before the end of the day most CE4 currencies managed to claw back all of the ground they had lost earlier, and the PLN was no exception. After hitting it’s daily high at 3.9750 the EUR/PLN pair inched down to the 3.95 area later in the session and eventually ended the day only slightly on the downside.
The recent weakening of the zloty is chiefly due to unfavorable global tendencies, including elevated rate hike expectations in the US and Eurozone, rather than the Polish economic fundamentals which all in all continue to support the strengthening of the PLN. Although as for now it seems that core markets together with domestic politics will continue to drive the domestic FX market. Hence we think more zloty volatility can be expected today and in the days to come.
(CSOB - Investment research)