EUR/PLN: NBP acts against zloty appreciation, 4.65 level in sight – Nordea

Economists at Nordea see the risk picture clearly skewed towards a higher EUR/PLN as the global outlook remains uncertain but expect the zloty to strengthen in the long-term. Furthermore, the unexpected NBP rate cut could indicate that the central bank will counteract any PLN strengthening, per Nordea.

Key quotes

“The zloty has been underpinned by global equity markets rallying and the dollar weakening. The correlations between these two variables and EUR/PLN, respectively, have not been as strong since mid-2018 – a pattern we expect to continue in the short-run. These factors have thus been more important for the PLN than the NBP's surprising decision to slash rates by 50 bp to the (new) effective lower bound of 0.10%.” 

“The rate cut was delivered without a scheduled meeting, in contrast to MPC comments and right after a rapid PLN strengthening. By weakening the zloty, both inflation and exports should be underpinned, ie the official rate cut explanation of a faster recovery and disinflation worries were not false per se, but it still implies that the NBP has put a de facto floor under EUR/PLN.”

“We expect EUR/PLN to test levels up to 4.65 in the short-term. In the second half of the year, we expect a mild PLN appreciation, as the market volatility may ease.”