The Polish zloty held to the 3.81-3.83 EUR/PLN area with no visible trend on the charts, as politics came back into focus on Thursday. We uphold our view that the ratification of the so-called “stabilization pact” seems to be a foregone conclusion and that the deal will probably be sealed either today or over the weekend. This will help dispel some of concerns that the market may have had about the threat of earlier elections, giving investors the long awaited break from politics. As such it should provide the zloty with some positive short-term stimulus. One must keep in mind though, that at this point in time, with the budget act still in parliament, the stabilization pact does not by any means restrict the president’s right to dissolve the Sejm. Hence the market’s reaction to the deal is likely to be cautious, with key technical and psychological resistance level still at 3.80 EUR/PLN.
As for today’s trading all will depend on politics, with the talks between PiS, Self-Defense and LPR on the program coalition clearly coming to an end. All in all however the zloty should remain stuck to the current 3.80-3.84 EUR/PLN range.
(CSOB - Investment research)