The Polish zloty got off to a calm start of the session on Friday with the EUR/PLN firmly locked in the 3.93-3.96 range and activity far from impressive ahead of the weekend. All look well for the unit until mid morning when the market was hit by speculations that FinMin Zyta Gilowska offered to resign after a row with the president Lech Kaczynski on tax issues. The report was immediately downplayed by the FinMin spokesman, but as in previous cases when such information surfaced PLN traders reacted frantically to the news. The EUR/PLN pair bounced back to the upper bound of its range testing bids at 3.97 later in the session. Unstable politics back on the Polish FX market (EUR/PLN).
Zyta Gilowska was not available for comment throughout the weekend, and until she herself denies the resignation claims the issue will most likely continue to linger in the background putting pressure on the zloty. If the FinMin steps down from office, which we still think is not the most likely scenario, we could very well see the 4.0 EUR/PLN mark broken quickly. Otherwise more range trade can be expected today, with market activity somewhat dulled by the football world championships and the prospect of the longer holiday weekend in Poland.
(CSOB - Investment research)