As the main currency pair (EUR / USD) breaks away from the parity, the zloty continues to decline. The Polish currency reacts quickly to new escalations from the Kremlin, and the EUR / PLN exchange rate indicates increased demand activity. Thus, according to analysts of the BNP Paribas bank, by the end of this year we should see the euro close to PLN 5, and the possible thaw will come only at the beginning of 2023, when inflation will stabilize and we will have greater clarity in the context of the energy crisis.
The zloty exchange rate had an unlucky week behind it
The last week was marked by decisions of central banks, of which the Fed turned out to be the most aggressive. The Americans were also followed by Switzerland (increase by 75 bp, level 0.50%), Norway (increase by 50 bp, level 2.25%) and the United Kingdom (increase by 50 bp, level 2.25%). ) and hawkish comments were heard among the ECB’s decision-makers. Against this background, the Polish Monetary Policy Council fares less and less, announcing that we are approaching the end of the interest rate hike cycle started in October 2021. At its September meeting, the Monetary Policy Council decided to raise the NBP reference rate by 0.25 percentage points again, this time the eleventh. percent to the level of 6.75%. However, BNP Paribas economists believe that amid falling economic activity, the MPC, by easing its bias, will raise the reference rate this year by a maximum of 25bp to 7.00%. – The MPC may return to tightening monetary policy at the beginning of 2023, when the economy starts to gain momentum again. Until then, we should observe a further weakening of the zloty exchange rate, therefore we forecast EUR / PLN at the end of the year around 5.00 – BNP analysts wrote in the note.
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– In the first months of 2023, we see room to increase interest rates by an additional 100bp to 8.00%, although at the end of the year
next year, the NBP reference rate should return to the level of 7.00% – they explained. However, analysts added that if the domestic currency turned out to be more resilient and / or the decline in economic activity in the country would be deeper, the MPC should keep interest rates unchanged at the beginning of the year and may decide to cut later this year.
The EUR / PLN exchange rate follows the volatile eurodollar
From the end of July, the EUR / PLN exchange rate fluctuated in the range of 4.65 – 4.80, but from the beginning of September we could observe a narrowing of this range and the formation of a side trend in the range from 4.65 to 4.77. However, the breakaway of the EUR / USD pair from the parity made the EUR / PLN price to test the PLN 4.79 range, temporarily breaking the consolidation.
EUR / PLN quotations as of 09/24/2022 Source: TradingView On Friday, along with worse PMI data for the German and French industry, the zloty slightly recovered, forcing the euro to test the support of PLN 4.72, where there was a clear activation of the demand side and a return to the level of PLN 4.74. However, this does not change the fact that over the past week the euro has strengthened against the zloty by over PLN 0.04, and the EUR / PLN quotations continue a lateral trend in the range of PLN 4.65 – PLN 4.77. Due to the lower than market expectations, the scale of interest rate increases. and the flight of capital from developing markets due to risk aversion caused by geopolitical factors in Europe, however, we should observe a further appreciation of the EUR / PLN currency pair. The next week may also be characterized by high volatility, due to the end of the so-called referenda in areas belonging to Ukraine that are lawfully occupied by Russian troops.
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