The zloty has a chance of strengthening all the time

The Polish zloty has remained relatively weak since the panic in the financial markets related to the pandemic last year. Most of the time since the beginning of this year, the EUR/PLN pair has remained in the range of 4.45-4.65. The weakness of the zloty is not unique – a large part of emerging market currencies have also experienced or are experiencing it. As noted by Ebury's analysts, the behavior of the zloty in recent months has, however, been a negative difference to other currencies in the region, including those issued by countries with worse macroeconomic foundations.

In their opinion, it was caused by external factors, i.e. the strengthening of the dollar and the pandemic situation in the world, as well as internal ones, the most important of which is the policy of the central bank. According to Ebury, rising inflation while maintaining a particularly dovish monetary policy has resulted in deeply negative real interest rates.

"The policy of the NBP remains ... exceptionally mild compared to other banks in the region - not only the Czech Republic and Hungary but even Romania, which although it has not raised the highest rates in the region yet, has started to tighten its policy, e.g. by stopping buying Treasury securities. on the secondary market," the release reads.

According to experts, one gets the impression that the dovish consensus in the Monetary Policy Council has recently been broken. The topic of interest rate increases appears more often in the communication of individual decision-makers with the media.

"We assume that the Polish currency will strengthen both later this year and in 2022, and the MPC will start a cycle of tightening the policy in the near future, which is possible thanks to the country's better economic situation. Besides, the US dollar will stop appreciating and experience a slight depreciation in tandem with the euro,” Ebury stated.

(WBJ)