On Wednesday, we notice more weakness in the zloty. The euro and the franc reached levels last seen in March 2022, while the dollar was last too expensive more than two decades ago. According to Jarosław Kosaty of Santander Bank Polska, “the key to stabilizing the zloty will be the NBP connection, with an increase of at least 75 basis points and less conclusive signals to the end of the cycle.”
Euro, dollar, franc and pound sterling – July 6 prices
On Wednesday, around 8.45 am, you had to pay about 4.76 PLN for the euro.
One US dollar costs approximately 4.64 PLN. This is the highest level since 2000.
The Swiss Franc was close to PLN 4.79.
The British pound is also more expensive. You had to pay about 5.54 PLN for the British currency.
“Zloty Stabilization Key”
– We have two components that work against the zloty. On the one hand, we have fears of a global recession that are growing in the world, which favors the US currency, and on the other hand, we have a rather poor position regarding the final form of the anti-fragmentation instrument of monetary policy, announced by the European Central Bank (ECB). Since the extraordinary meeting of the European Central Bank, there has been some information indicating that this instrument may be subject to certain limitations, both in terms of the volume of bond purchases and the conditions that must be met by the countries benefiting from this instrument. . This is the element that causes it despite the high inflation expectations in Euro-zone Jaroslaw Kosati, an analyst at Santander Polska Bank, said in an interview with the Polish news agency that the markets are trying to bypass the European currency until these problems are resolved.
He added: – As a result, we have unfavorable sentiment towards European markets. EUR/USD is trying to move towards parity, on the other hand, EUR/CHF has already broken this parity. All of this is coupled with uncertainty about the additional cycle of interest rate increases. in Poland. He added that in such unfavorable conditions – global and European – we have increased pressure on the Polish currency.
In the opinion of the analyst, the main factor for the Polish currency will be the decision of the Monetary Policy Committee and the signals from the Board and the head of NBP. A fulfillment of market expectations and a 75 basis point increase, as well as less conclusive signs of a possible end to the cycle, should help stabilize the zloty.
– At the moment, most of the potential for impact on the zloty lies with the NBP. The market expects to raise the interest rate by 75 basis points at the next meeting. Bearing in mind that there will be no MPC meeting in August, it appears that meeting these expectations are the minimum factors that could enable the Polish currency to stabilize. Kusati expects a rally on a smaller scale to intensify negative trends against the Polish currency.
A rise of 100 basis points would of course support the zloty, but it appears that given the conditions of a slightly faster slowdown of the Polish economy, it is unlikely. Moreover, in the context of NBP’s previous announcements that it is nearing the end of the cycle, the market could view this increase as a way to end the rate raising cycle. Therefore, it appears that the main factor in stabilizing the zloty will be NBP connectivity, an increase of at least 75 basis points and a slightly lower categorical signal for the end of the cycle – he added.
How much can interest rates go up?
The next meeting of the Monetary Policy Board will be held on Thursday. It will be the last meeting before the summer holidays – there is no decision-making meeting in August. There is no consensus among economists’ expectations on how much to raise interest rates in July.
According to economists from Goldman Sachs, the board will raise the key interest rate by 75 basis points to 6.75 percent during the next meeting. Pekao Bank economists also expect an increase of 75 basis points.
The Polish Economic Institute released last Wednesday, even before preliminary data was published in inflation In June that in July interest rates It will increase by 50 basis points to 6.5 percent. It will be the end of the price-raising cycle.
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