Polish Zloty: Import pass-through risks challenge cuts – BNY
BNY’s Geoff Yu argues that Euro strength is amplifying import price pass-through risks for Poland, with EUR/PLN gains feeding into higher import prices. The Monetary Policy Council’s guidance of unchanged rates contrasts with market pricing for a return above 4%.
ABN AMRO's Georgette Boele points out that interest rate expectations between the Eurozone and Poland have caused the EUR/PLN exchange rate to climb. The National Bank of Poland currently has a 3.75% interest rate, with the possibility of a 25 basis point cut after the summer, while ABN AMRO anticipates the ECB will raise rates once more to a 2.5% deposit rate.
This disparity in policy has led the bank to raise its EUR/PLN projections. Over the course of June, the Polish złoty has declined by 3% against the euro. Differences in interest rate expectations between the Eurozone and Poland have played a key role in the EUR/PLN trend. The expectation that the National Bank of Poland and the European Central Bank will move in opposite directions has resulted in a stronger EUR/PLN, leading to a weaker złoty.
ABN AMRO has upgraded its EUR/PLN forecasts to reflect this policy divergence for the current year. If the National Bank of Poland sounds more dovish than anticipated, EUR/PLN could reach 4.40.
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