The zloty breaks one barrier after another.  “Unique location”

On Monday, the zloty strengthened against major currencies by about 0.40-0.70 percent, reaching its highest levels in four years. The Polish currency broke an important barrier against the euro, and the EUR/PLN exchange rate fell below PLN 4.29, reaching PLN 4.27 on Monday after 3 p.m. The last time the zloty was this strong was in 2019.

The zloty is strengthening. He earned nearly 10 cents in one month

There was also a strengthening regarding the US dollar, as its exchange rate fluctuated around PLN 3.91. It has also become cheaper Swiss francBringing the exchange rate to 4.45 Polish zlotys and the British pound – 5.02 Polish zlotys.

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For experts, the strengthening of the zloty was not a surprise. They were supported by a weak dollar, fading expectations of interest rate cuts in Poland this year and the potential influx of funds from the European Union.

The change in the PLN exchange rate against major currencies becomes more noticeable when we look at it from a time perspective. Over the past month, the dollar has lost approximately 8 cents of its value, it went from over PLN 4.05 about 30 days ago to the current rate of PLN 3.93, although it should be noted that before the latest US inflation rate was announced, the dollar was at PLN 3.91. A similar trend can be observed in the case of the euro. Over the course of about 30 days, the price of the EU currency fell from PLN 4.35 to PLN 4.27, finally rebounding from this threshold and settling at a level one penny higher. Interestingly, the PLN 4.30 level was for a long time a resistance point.

Will the zloty continue to strengthen? There are expectations

Bartosz Sawicki, an analyst at Cinkciarz.pl, observed the same relationship. In an interview with money.pl about the recent strengthening of the Polish currency, the expert pointed this out The euro exchange rate was “stuck” at the level of PLN 4.30 for a long time.

The situation changed when investors again began to take into account the possibility of interest rate cuts by the Fed and the European Central Bank, and the dollar found itself on the defensive. The EUR/PLN pair finally broke its lowest levels since December last year and reached the lowest level since the pandemic in March 2020 – Sawicki confirms.

However, the analyst emphasizes that there is no sudden strengthening of the Polish currency. The prices of unified currencies have been subjected to low fluctuations for weeks and are gradually declining to lower levels. In March, the euro exchange rate fell by only 0.8%. – Sawicki notes.

In his opinion, the medium-term EUR/PLN balance level is gradually moving from around 4.35 towards the target level of PLN 4.25.

The zloty has already made a big leap

Sawicki claims that the jump starts from the end of 2023 The ability to strengthen the zloty has been largely exhausted, even reaching the verge of overvaluation. According to the analyst, the dollar and franc rates should have more room to fall than the EUR/PLN.

USD/PLN may fall from 3.65 this year. In the coming quarters, the Swiss currency will gradually equal the value of the euro, which will lead to the CHF/PLN rate falling below 4.30 – the expert predicts.

Do the National Bank Chairman’s suggestions affect the market?

– as a result of The zloty found himself in a unique position. There is practically no other economy of similar importance on the Old ContinentWhere expectations of interest rate cuts in 2024 will be lower – Sawicki tells us.

Our interlocutor confirms this A sharp decline in inflation (which, according to Central Statistical Office forecasts, should fall from 3.9 to about 3% on an annual basis) while maintaining the reference rate at 5.75%. After many years, it brought real interest rates back to positive values. – The interest attractiveness of the Polish zloty reaches its peak at a time when the market once again begins the countdown to interest rate cuts in major economies – notes the expert.

The foundations of the Polish currency, we hear, are completed by the favorable position in the balance of payments, the inflow of foreign direct investment, the end of the conflict with the European Union and the accelerating economy. – These factors will mean that the zloty, just as was the case in the first part of the year, should remain strong and stable – concludes Sawicki.

The European Central Bank and the Federal Reserve may cut interest rates. How will the zloty react?

The zloty exchange rate may be affected by decisions made on both sides of the ocean. The Fed makes clear that interest rates will fall later this year. The market is “betting” that this will happen in June. The ECB does not provide advertising. But analysts interpret the decisions he makes as paving the way for lowering interest rates. It may also occur in June or July.

Experts commented on the data received from abroad. Mikołaj Raczynski, managing director of the port platform, points out that the so-called last mile in the fight against inflation is likely to be the most difficult. He emphasizes that although inflation is falling rapidly from peak values, it is clearly rooted in the vicinity of 3 percent, while the inflation target set by the Federal Reserve is 2 percent. However, Raczynski points out that today's data does not change expectations regarding the start of interest rate cuts by the Fed this year, although the reduction in the cost of money will be implemented slowly.

Bartosz Sawicki emphasizes that these decisions will have an impact on the zloty. When the Fed tried to allay the belief that cuts were imminent, it ensured the strength and relative stability of the zloty. Now, when the fear of the Fed starts to evaporate and the countdown to the first cuts starts again, the zloty could resume its strength. According to Sawicki, the foundations of the network are completed by the favorable situation in the balance of payments, the inflow of foreign direct investments, the end of the conflict with the European Union and the accelerating economy.

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