The Polish zloty remained range-traded through most of the day

The Polish zloty remained range-traded through most of the day till the rumors that the president might call for snap elections frightened both fixed income and equity investors. The market opened at 3.79 EUR/PLN and 3.18 USD/PLN and the zloty hovered around the opening levels up to 15:15. At that time it was hit by the speculations that president Lech Kaczynski have made the decision to dissolve the parliament and to call for earlier elections - just hours before the Monday-midnight constitutional deadline. According to earlier declarations by the President, the parliament failed on January 31 to meet the deadline for budget preparation, giving the President the right, but not the obligation, to dissolve the parliament in the following fortnight. The President announced its decision in a televised speech at 20:00 local time. Finally he surprised many deciding not to hold earlier elections.

The data on C/A deficit in December remained in the shadow of political uncertainty. The C/A deficit of EUR 410 m. was below the market consensus of approx EUR 500 m, largely due to narrower than expected trade balance deficit, that resulted mainly from lower activity in imports. It is worth mentioning that the November figures underwent a substantial revision, which indicates quite clearly that the quality of data is still an issue. Hence a revision of the data from December is highly likely and investors should not pay much attention to the preliminary data. Having given the president’s decision not to dissolve the parliament we expect a large portion of the uncertainty to be removed from the market. It may result in strengthening of the Polish currency today far beyond the levels from the opening of the week.

(CSOB - Investment research)