EUR/PLN: Downside pressure to dominate in 2021 – Rabobank

The EUR/PLN paircontinues to trade above the technical support at 4.4580. While economists at Rabobank anticipate the downside pressure is set to dominate EUR/PLN throughout 2021 as reflected in the 12-month forecast of 4.30, they are also mindful that before this extraordinary year is over another brief spike higher in the pair may occur.

Key quotes

“The downside pressure on EUR/PLN is fuelled by global euphoria that a coronavirus vaccine will be available relatively soon. In addition to that, President-elect Biden is widely expected to refrain from escalating trade tensions with China and the EU. This would be positive for global trade and for Poland as one of the biggest manufacturers in the EU.” 

“The upside pressure on EUR/PLN is driven by the prospect of a bleak winter due to various restrictions imposed at home and by Poland’s main trading partners in the EU to regain control over the pandemic. Those measures have already caused a slowdown in economic activity in Q4. The dispute over the rule of law mechanism between Poland/Hungary and the rest of the EU is also a source of upside pressure on EUR/PLN.”

“Another potential bullish trigger for EUR/PLN could be a correction in global stocks. Following impressive gains in November, the gap between global equities and real economies has widened further increasing the risk of a correction from stretched levels. When the markets are so enthusiastic, it is usually a major warning signal to be prepared for a correction lower which would have bullish consequences for EUR/PLN squeezing in towards the 4.6458 high set at the end of October.”