KBC Market Research Desk
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The Polish zloty continues in strengthening
Regional PMIs signal good shape of manufacturing sector
Yesterday, the Polish zloty prolonged its rally and firmed to 2-year highs. Against the Czech koruna, the currency has been strongest since 2008. What has happened? The growth of the Polish economy is decent, with prevailing deflationary pressures (consumer prices fell by 1.6 % y/y in February). Yields are attractive. The NBP cut its base rate to the all-time low of 1.5 % but in comparison to the Eurozone, interest rates in Poland have remained high. Moreover, central bankers in Warsaw have frequently reminded markets of their commitment not to ease monetary policy further. In contrast to Poland, the base rate of the CNB technically equals zero and central bankers prevent koruna from strengthening by interventions. Dovish comments of CNB Board members uttered at their last meeting presage prevailing dominance of the zloty over the koruna also in coming months.
Regarding today’s releases, PMI data showed that the manufacturing sector has remained in a good shape. Although the Polish PMI was slightly lower in monthon- month terms, it has stayed above 50 for the sixth straight month in March, mirroring expansion in the manufacturing sector. Hungarian and Czech PMI showed even better results than their Polish counterpart – 55.6 and 56.1 respectively. We expect latest PMI to provide mild support for the region.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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