The Polish zloty got off to a strong start of the week underpinned by the softer dollar and domestic politics on Monday morning but eventually fell victim to a technical correction and ended the day slightly in the red. First thing in the morning the EUR/PLN continued to march, rather confidently, toward the 3.80 mark, but in the end came short of testing this crucial support level. Luck changed hands before noon as gentle profit taking pushed the zloty back to the 3.83 range.
With the ma jority coalition in place the domestic short term political outlook seems somewhat clearer which should in all be moderately positive for the zloty, especially since markets have long ago become accustomed to the thought that the populists will enter the government. Overall however we would not overestimate the immediate impact of politics on markets, unless of course recent developments lead to further changes for example in the personal line-up of the government (particularly at the position of FinMin). As for now this seems highly unlikely, hence with the economic calendar empty till Friday afternoon and political nerves calmed the zloty will continue to look for inspiration mainly from the euro dollar in the coming days.
(CSOB - Investment research)