The Polish zloty remained locked in a tight
range on Monday as 3.88 EUR/PLN level
provided ample resistance and as other CE4
markets started the week off on the back
foot. With no fresh news on the coalition
deal during the day the batch of macro data
(more in fixed income part) got the market’s
full attention, but was unable to push bonds,
and hence the zloty in a discernable
direction.
Late in the evening the long
awaited news on the coalition agreement hit
the headlines – Jaroslaw Kaczynski decided
to reappoint Self-Defense’s Andrzej Lepper
to the deputy PM and agriculture minister
post and hence revive the conservativepopulist
government deal after a month-long
break. Interestingly the PiS-SO-LPR
coalition will not have the majority of seats in
the Sejm, after several breakaways left the
Self-Defense recently, taking the vote count
down to 230 (of 460 seats). In this case the
PiS will have to resort to the parliamentary
plankton for support (further coalition
negotiations will be held to discuss this
matter). Nevertheless the two dissolution
votes planned for today should be an acid
test for the coalition in the current set up -
one which it should easily pass given the
fact that a 2/3 majority is needed to shorten
the parliament term.
Unlike its regional peers, the PLN
has yet to hit a soft patch after last week’s
solid gains saw the unit edge to two month
highs against the euro. Profit taking seems
unlikely today though, unless other CE4
markets lead the way, with the conservativepopulist
coalition back in place and the
dissolution votes a mere formality. Markets
have had the chance to price in the PiS-SOLPR
deal already, but with the remaining
political uncertainty wiped away the zloty
should react positively at first to the
perspective of short-term political stability.
Nonetheless as we have stressed before
apart from being the most likely scenario for
some time now, the revival of the
government deal is not as market friendly
in the medium and long term perspective,
given the frailty of the coalition and its
“social” orientation, so any gains are
likely to be limited to the current 3.88-
3.92 EUR/PLN range.
(CSOB - Investment research)