The Polish zloty inched up by just over 0.5 percent against the euro as emerging market currencies enjoyed a relief rally on Tuesday after the soft start to the week the day before. The session itself was rather calm though with not much action from the euro dollar and domestic issues also failing to provide much inspiration. The market basically ignored Zyta Gilowska in the morning, who speculated on leaving the government and at the same time tried to reassure markets that the government was thinking of resuming euro zone accession talks in 2009. The zloty took the core inflation figure, which failed to surprise the market, in its stride as well.
Thanks to renewed demand from abroad the EUR/PLN gradually headed south throughout most of the session and eventually ended the day in the 3.94 area. Overnight the zloty lost almost all the ground it made up during the day and it will be up to the regional sentiment once again whether the unit manages to regain its footing today. On the domestic data front the usually weighty retail sales numbers will be released, and are likely to come in quite strong although we expect a slightly softer number than the market consensus. Nonetheless the number itself should be neutral for the zloty, which still looks locked in the 3.93-3.98 EUR/PLN range. The EUR/PLN pair gets volatile on sell-off in emerging equity markets.
(CSOB - Investment research)