EUR/PLN - too early to expect the pair to break out of the current horizontal pattern

After hitting a daily high of 3.93 EUR/PLN on Monday, the Polish zloty did not have enough momentum to extend the rally above this level and eventually sellers got the upper hand as US markets opened. The unit ended the lackluster session near month-long lows against the common currency.

So far core market factors remain the most important determinant of emerging market sentiment so today’s ISM consumer confidence release will most likely be the key market mover since it might give some indication as to whether the August retail sales will be able to repeat the strong reading it had in July. Other than that with the UK-based players back in action and with the summer holidays nearly over liquidity should slowly return to normal. Hence we could see a delayed, positive reaction from markets in the region to the 50 bps rate hike by the NBH yesterday and the coalition ruffle in Poland. Nevertheless with the barrage of events due later this week both on the domestic front and abroad it might be a bit too early to expect the EUR/PLN pair to break out of the current horizontal pattern.

(CSOB - Investment research)