The Polish zloty ended a wild, two-day winning streak to close lower on Friday

The Polish zloty ended a wild, two-day winning streak to close lower on Friday as profit taking kicked in throughout the entire CE region. The EUR/PLN got off to a flying start in the 3.94 area, its strongest level in roughly 6 weeks, but came under pressure right from the start of the session. By noon the selling was over and even though the zloty attempted to edge past PLN 3.96 per euro later in the session it remained locked in a tight range just below this level for the rest of the day. Even though the regional mood remains positive the Polish zloty might turn out to be the underperformer among CE4 currencies this week, since all central banks in the region except the NBP are expected to raise interest rates in the coming days.

The market is thoroughly convinced that the MPC will not change rates and such a decision is already largely priced in by the market so we would not put too much weight to this. Several key data releases remain this month including the core inflation numbers due at 14:00 GMT today and the retail sales numbers expected tomorrow. The first should be neutral for the zloty while a stronger than expected sales figure might lead to some bond selling which could spill over to the zloty. Other than that it will all be down to the global risk conditions for the zloty, so US housing market data will get ample attention tomorrow.

(CSOB - Investment research)