EUR/PLN to move lower next year to 4.35 – Rabobank
|Piotr Matys, Senior Emerging Markets FX Strategist at Rabobank sees yet another squeeze higher in EUR/PLN, but the pair should drift lower in 2021.
Key quotes
“At its next meeting scheduled on November 4, the Monetary Policy Council is likely to send a relatively dovish message to provide the bond market with a firm reassurance that QE will be fully utilised to keep borrowing costs at record low levels. This in turn would allow the government to issue a fresh set of bonds to provide companies with liquidity and reduce the risk of a significant increase in unemployment, which would severely undermine confidence and over the mid-term horizon would result in slower recovery from the 2020 recession.”
“The value of the Polish zloty will determine how much the government can borrow – should it decide to do so – to protect the labour market from the negative effects of the second wave of the pandemic. Expansionary monetary policy around the globe has so far limited the pressure on the currency and allowed the NBP to embark on QE. However, this does not give them a blank cheque. A significant depreciation of the zloty would increase inflationary pressure and could also weigh on consumer confidence. The NBP would have to scale down QE and even tighten monetary policy well before economic recovery is fairly robust.”
“We expect EUR/PLN to peak at 4.65 when there is sufficient evidence in the coming weeks that the pandemic is once again under control. Looking further ahead, EUR/PLN should drift lower in 2021 and end next year at 4.35. This is based on the assumption that private consumption and investment will increase as the current high level of uncertainty fuelled by the coronavirus will diminish when a vaccine is available (hopefully in the first half of the year, which would bode well for the second half).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.