Polish Zloty (EUR/PLN) – Set up for further depreciation?

In a week in which we lacked positive impulses there is no surprise emerging markets currencies experienced corrective movements. Despite rumors, the Greek situation is not solved. Spain has not applied for financial help. U.S companies quarterly earnings have not saved the day as most of them are reporting disspointing results. In the light of weak macro data publications there was no other direction for the Zloty than south. Especially, that the PLN has not gained any support from local factors. After last week’s dramatic industrial production reading, this time the retail sales report dissapointed market participants. Another proof the MPC should have already acted by cutting interest rates. Marek Belka, MPC’s President stated the economy is finally ready for lower interest rates. I believe it was ready some time ago. Andrzej Bratkowski, the most dovish MPC member, commented that interest rates should be cut by 100-125 bp till the end of the year. Of course, the consrvative MPC will not do it this way, but the short term future of the PLN mcuh depends on how much and quickly interest rates will be lowered (because that they will on the Nov meeting, that is a sure thing).