29 Jan 2015
Door open for EUR/PLN downside medium term – Danske Bank
FXStreet (Edinburgh) - Chief Analyst Lars Christensen at Danske Bank assessed the current outlook for the Polish zloty.
Key Quotes
“The outlook for the Polish economy has deteriorated recently”.
“The economy is falling deeper and deeper into deflation and it has become even clearer that growth remains well under its potential and that inflation is likely to remain well below the Polish central bank’s official 2.5% inflation target in coming years unless bold monetary easing is undertaken”.
“Despite the deflation in the Polish economy having deepened, the Polish central bank (NBP) has been very reluctant to cut interest rates, including at the latest monetary policy council meeting”.
“Even though we continue to think the NBP will cut rates further in 2015, at the moment it is unlikely to move faster than currently expected by the markets”.
“Recently, the zloty has come under renewed pressure from contagion in regard to the escalation of the Russian economic and financial crisis”.
“The contagion risk remains elevated and we see a risk of more PLN weakness in the near term. However, the zloty is now slightly undervalued and this is likely to give some support to the zloty on a six- to 12-month horizon”.
“We now have a flat profile for EUR/PLN on the 12M horizon as we believe the risks to PLN from Russia outweigh the fact that the undervalued zloty should fundamentally see some support”.
Key Quotes
“The outlook for the Polish economy has deteriorated recently”.
“The economy is falling deeper and deeper into deflation and it has become even clearer that growth remains well under its potential and that inflation is likely to remain well below the Polish central bank’s official 2.5% inflation target in coming years unless bold monetary easing is undertaken”.
“Despite the deflation in the Polish economy having deepened, the Polish central bank (NBP) has been very reluctant to cut interest rates, including at the latest monetary policy council meeting”.
“Even though we continue to think the NBP will cut rates further in 2015, at the moment it is unlikely to move faster than currently expected by the markets”.
“Recently, the zloty has come under renewed pressure from contagion in regard to the escalation of the Russian economic and financial crisis”.
“The contagion risk remains elevated and we see a risk of more PLN weakness in the near term. However, the zloty is now slightly undervalued and this is likely to give some support to the zloty on a six- to 12-month horizon”.
“We now have a flat profile for EUR/PLN on the 12M horizon as we believe the risks to PLN from Russia outweigh the fact that the undervalued zloty should fundamentally see some support”.