The Polish zloty extended Tuesday’s rally
and eventually made it past 3.94 and into
the 3.9250 EUR/PLN area yesterday.
Nonetheless without the long awaited
impulse from either politics or the economy
trading conditions were extremely thin ahead
of today’s ECB decision on rates and the US
payrolls tomorrow. On the data front the
Polish Central Bank announced that the H1
FDI inflow amounted to roughly EUR 4.8 bn,
up from 3.5 bn in the same period of 2005.
According to NBP officials the healthy
performance at the half way mark bodes well
for the cumulative 2006 result, which should
easily top EUR 8 bn. We find no reason to
doubt this estimate and see the strong inflow
as one of the fundamental factors behind our
positive medium and long term zloty outlook.
The ECB decision on rates will be the eye
catcher and unless domestic politics provide
the market with a surprise the zloty should
look to the eurodollar for inspiration today.
The rate hike is a foregone conclusion and
has been fully priced in by the market.
Moreover, the ECB has been perfectly clear
on its intentions to keep on raising rates so
we would expect a visible (negative) reaction
from the zloty only if Trichet offers the
market significantly more of the recent
hawkish mantra.
(CSOB - Investment research)