The Polish zloty got off to a healthy start of the session looking confident to capitalize on the bold rate hike in Turkey the night before, but in the end failed to do so as lira gains were capped by fears that the tightening could dampen Turkish economic growth. The unit then gradually eased back to the 3.95 –3.96 EUR/PLN area ahead of the ECB decision on rates and the press conference which followed. The largely expected 25 bps hike went by without any notice but the softer tone of the communiqué was somewhat of a disappointment and provided the unit with some relief from the strengthening US dollar. The rebound took the pair back to 3.94 but turned out to be short lived. Just before the closing strong selling kicked in and the zloty quickly found itself in the red.
We believe more consolidation in the 3.93-3.96 EUR/PLN range is in store for the zloty today. With the domestic calendar empty inspiration should continue to come from regional factors and the eurodollar.
(CSOB - Investment research)