EUR/PLN: Zloty to rebound from undervalued levels – MUFG

FXStreet Insights Team FXStreet

During July the Polish zloty weakened against the euro from 4.5178 to 4.5623. The National Bank of Poland (NBP) plans for only gradual tightening are dampening upside for PLN. However, economists at MUFG Bank expect the zloty to rebound in the coming months.

The main downside risk is another wave of COVID-19

“The widening policy divergence between the ECB which has strengthened its commitment to maintain low rates, and the Fed’s gradual shift to tighter policy has triggered a period of European currency weakness. Similarly, the NBP continues to maintain a relatively dovish policy stance which is not helping the zloty.”

“At their latest policy meeting the NBP failed to provide any signal that it is moving closer to tightening policy. The NBP maintained a cautious stance to tightening policy despite significant upward revisions to the inflation outlook.”

“The main downside risk is posed by another wave of COVID-19 but so far the Delta variant has not yet led to a material pick-up in cases.”

“Overall, we still expect the undervalued zloty to rebound in the year ahead.”

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FXStreet Insights Team

FXStreet

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