The Polish zloty lost some ground consecutively on Friday as tensions between allies that had sealed so called “stabilization pact” became more evident. The market opened at 3.7880 EUR/PLN and 3.1510 USD/PLN and shortly after that the unit broke the key resistance level at 38.00 EUR/PLN hovering around it for the next few hours. The PiS leader Lech Kaczynski announced, that they might dissolve the parliament and trigger snap elections, if the parliamentary pact underpinning the government remained shaky. He added that the pact is under threat what boosted up political uncertainty. As a result the zloty hit daily lows at 3.8110 EUR/PLN just before the closing.
From our perspective the risk of earlier elections is currently low as the main goal of the PiS is to pass key legal bills through the parliament (e.g. on Central Anticorruption Agency). In theory Kaczynski’s party has two options to call for the elections. The first would be to provide a motion to dissolve the parliament that will have to gain support of the PO and SLD, which seems to be currently quite likely. This puts both the PiS’s allies – Samoobrona and LPR in the corner, as they are in the bottom in the public opinion polls. The second one would be to withdraw its support for the PiS government, which would be, in fact, too confusing to its own electorate. So it is unrealistic.
Politics should come back in the spotlights as the calendar of economic releases will be empty this week. We expect domestic politics to stabilize as the PiS’s allies have in this situation hands tied.