TMS FX commentary

The fluctuations of the EUR/PLN and USD/PLN pairs were especially high at the end of the week, when the market was relatively illiquid. Generally the zloty has depreciated and the deviation from the old parity has risen to 4.4%. The EUR/USD pair reached over 4.80 level, and the USD/PLN pair peaked at 4.065 weekly max. The main reason of the zloty's weakness were worries over the dissolution vote in Parliament. On the other hand, the market was abound with rumours that a big hedging fund was removing assets from emerging markets and effectively depreciating the zloty. The most important event of the week was the Monetary Policy Council's meeting. As expected, the MPC left the interest rates unchanged. Nevertheless, the bias was changed from neutral to restrictive. It means that the MPC may hike the rates in the upcoming months. In our opinion this will take place in July or August. Next week we expect the złoty to recover a little bit thanks to the fact that a new prime minister will be appointed.