Zloty held to an extremely tight range

The zloty held to an extremely tight range around EUR/PLN 3.81 in what must have been one of the most dull and least volatile trading sessions in weeks. With not data on the domestic agenda to look to, the updated EC convergence report caught some attention, but since it was anything but revolutionary, it had no discernable impact o the market.

The Commission once again stressed that even though Poland had one of the three lowest inflation rates in the enlarged EU and long term interest rates had dropped below the Maastricht reference value, it was still far from fulfilling all the Eurozone entry criteria. As before the main problem remains the excessive budget deficit, which the EC sees at just under 4% of GDP in 2009, far above the sub 3.0% mark written into the updated convergence program prepared recently by the Polish Finance Ministry. The Commission disregarded the Polish estimates and stressed that there was no reason to lift the EDP procedure for Poland. Even though the EC deficit forecasts do seem a bit on the high side we have heard similar wording from the European officials repeatedly in recent weeks so such comments are more and more becoming a non-event, especially since the ruling conservatives obviously still plan to stay out of the EMU for as long as possible, rather than to enter unprepared. In this respect, also the idea of Poland potentially holding a referendum on the euro entry sill causes some irritation with EU policy makers.

The domestic calendar doesn’t liven up yet, with only the 2Y T-bond tender on the agenda, so we should be up for yet another calm, range-bound session for the zloty today.

ČSOB Investment Research