The Polish zloty moved higher benefiting from bond-related flows on Wednesday morning as the market continued to digest a dovish communiqué following the MPC decision on rates and the NBP’s unexpectedly soft inflation report. Within two hours after the opening the EUR/PLN pair was briefly seen trading near the key 3.80 support, only to rebound back to pre-opening levels later in the session. Till the end of the day the zloty hovered around the level of 38150 EUR/PLN.
With the days of national mourning over domestic politics should move toward the center of market attention in the days to come. Additionally the calendar of economic releases will be empty till the end of next week so the politics will be watched more carefully to then. We expect that talks of the governing PiS with Self Defense and LPR about so called “stabilization pact” will be sealed as early as today or tomorrow. It will substantially reduce chances of a call for earlier parliamentary elections by the president Lech Kaczynski. Gradually stabilizing political outlook should have a positive impact on the valuation of Polish assets.
(CSOB - Investment research)