EUR/PLN: Polish rate hike unlikely to initiate a more forceful move lower – Danske Bank

On Wednesday, the Polish central bank surprised market participants with an interest rate hike. Analysts at Danske Bank are skeptical that the move will initiate a permanent move lower in EUR/PLN but they add that near-term the Zloty will likely strengthen.

Key Quotes: 

“We are sceptical that today’s hike will initiate a more forceful move lower in EUR/PLN. This is in part because we think that the central bank will not be substantially more hawkish partly as they still see the inflation problem as outside the remit of the central banks policy. Secondly, a lot is already priced in with market pricing expecting the central bank rate to reach 2% (or full normalisation) over the next year. This may be challenging as the slowing global manufacturing cycle may dampen Polish growth, which the MPC pays a lot of attention to as well.”

“We expect the USD to strengthen (and EUR/USD to fall further) which is typically a headwind for the Zloty. Hence, we maintain our modestly positive view on the Zloty with possible more strength near-term.”