Despite calmer global equity markets and the slightly more favorable risk appetite
conditions the Polish zloty remained the regional underperformer on Tuesday. The
EUR/PLN pair attempted to move lower throughout the session, but strong selling
was seen in the 3.91 area and the unit eventually had to retreat and ended the day little
changed at just below 3.92. In the longer term, the strong fundamentals including
the expected strong and balanced economic growth, low inflation and safe basic balance
suggest the zloty is undervalued. In the short term, with the EMU rate hike fully
priced in and NBP visible less likely to follow in the footsteps of the ECB the diminishing
rate premium may prove to be the decisive factor for the PLN and should keep
the unit under pressure in the current 3.90-3.95 range.
We expect trading to continue with some cautious upside risks in the days ahead as
the all-important CPI and wage data as well as Ben Bernanke’s testimony and a flurry
of US data come into focus later this week.
ČSOB - Investment research