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The euro, dollar and franc are becoming more expensive. The zloty is weakening after the decision of the Monetary Policy Council – quotations 07/09/23

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On Thursday morning we observe further weakening of the zloty against the main currencies. The Polish currency is losing against the euro, the US dollar and the Swiss franc. According to Santander Bank Polska economists, a lot may depend on today’s statements by the president of the National Bank of Poland, Adam Glapiński. “If the Monetary Policy Council signals that it was actually a one-off, advance move and there will be no further reductions for a long time, the weakening of the zloty may slow down,” they wrote in their morning commentary.

On Wednesday, around 3:30 p.m., the zloty began to weaken rapidly. The changes amounted to a few cents. It was then that the announcement with the decision of the Monetary Policy Council (MPC) was published.

PLN weaker after the MPC decision

The Council surprised economists and lowered it interest rates by 75 basis points. The reference rate went down from 6.75%. up to 6.00 percent “The scale of the move is a huge surprise for the market, which was preparing for a ‘standard’ cut of 25 bp. There were casualties – the zloty was severely damaged by the decision,” wrote Roman Ziruk, senior analyst at Ebury, in a comment.

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On Thursday morning we observe further weakening of the zloty.

Around 8.30 a.m. the euro, dollar and franc become more expensive by about 1 grosz. You had to pay almost PLN 4.58 for one euro. The dollar cost PLN 4.27 and the Swiss franc PLN 4.79. The levels observed on the EUR/PLN and USD/PLN pairs are still over 2%. (11 groszy) lower than at the beginning of the year.

“The Monetary Policy Council yesterday reduced the reference rate for the first time since May 2020. Economists expected the reduction, but its scale turned out to be surprising. Instead of the expected drop from 6.75% to 6.5%, the reference rate dropped to 6%. i.e. the level that was in force in June last year. The EUR/PLN exchange rate increased above 4.58 and USD/PLN above 4.28. Currently, the quotations remain close to these levels,” we read in the morning comment of the brokerage house Oanda TMS Brokers.

Santander Bank Polska economists also emphasized that “there was a significant weakening of the zloty at yesterday’s session.” “The domestic currency was losing against the euro from the beginning of the day from approx. 4.47 to approx. 4.50 before the decision of the Monetary Policy Council. After the decision, the EURPLN rate soared towards 4.58, losing approx. 1.6 percent during the day. Thus, on yesterday’s session, the zloty was the weakest currency in the universe of currencies of emerging economies. The Czech crown and forint lost approx. 0.4-0.5 percent. – indicated in the morning report.

“This morning the zloty continues its depreciation, and the decision of the Monetary Policy Council and the drop in FRA rates may encourage short-term investors to play against the zloty also in the coming months. A lot may depend on today’s comments of the President of the NBP and subsequent decisions of the Monetary Policy Council. If the Monetary Policy Council signals that it was actually a one-off anticipatory move and there will be no further reductions for a long time, the weakening of the zloty may slow down. However, if the dovish tone of the Monetary Policy Council is maintained and rates are reduced further quite quickly, the zloty may continue the depreciation trend,” Santander economists said.

In their opinion, Poland is rather “one of the last countries in the region where such a quick rate reduction would be justified, and the weakening of the zloty may weaken the disinflation trend.”

On Thursday, there will be a press conference of the President of the National Bank of Poland and the Chairman of the Monetary Policy Council, Adam Glapiński. The conference is scheduled to start at 3 p.m.

Main photo source: Shutterstock



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