Despite early strengthening the Polish zloty lost some ground on Monday on the back of negative sentiment toward emerging markets that caused further reallocation of capital from emerging to core markets. The market opened at 3.8905 EUR/PLN and 3.2585 USD/PLN and shortly after the zloty started clawing back last week losses, what was triggered be the weakening American dollar. As the global sentiment reversed and the dollar started gaining momentum the zloty lost more than 1 percent, hit by a return to an emerging market sell-off. It seems that concerns about the NBP independence voiced by the ECB President Jean-Claude Trichet had practically no impact on the market that was driven primarily by global trends. Trichet called on Poland’s government to respect the independence of the central bank.
The conflict between ruling conservatives and the central bank has been trigger last week after the central bank governor Leszek Balcerowicz excluded vice-minister of finance Cezary Mech from the meeting of the banking supervisory commission. Initially, allies of the so called “stabilization pact” intended to put Balcerowicz in front of a special state tribunal which could lead to his dismissal. However, the leader of the PiS Jaroslaw Kaczynski said yesterday that it is unlikely to master a majority needed to do so. Instead of it, they plan to establish a parliamentary commission that would investigate issues on NBP, banking supervision and privatization of the banking sector in Poland.
The motion on that will be filled today together with extraordinary meeting of the parliament that would be purely devoted to discuss the above issues. Hence some nervousness may appear on the market, but from our perspective the zloty, has proven recently to be immune to this type of disturbances and as such is more vulnerable to changes in global sentiment. The data on C/A balance that will be released today should have little impact on the FX as our estimate of EUR -270 m is close to the market one. We expect a slight improvement in the current account balance in January - mainly as a result of the improvement of the balance of trade because of the seasonal decline in imports.
(CSOB - Investment research)