Foreign exchange market update: PLN devaluation?

EUR/PLN under pressure

The interest rate spiral continues to turn rapidly. Despite an interest rate hike of 75 basis points and thus a key interest rate of 5.25%, the zloty cannot generate any lasting buying interest. In the last few weeks, Poland’s central bank has once again emphasized that there will be no uncontrolled price increases and that the top priority is to get the elevated inflation levels under control. One might argue that an interest rate level of more than 5% is attractive for investors, but the zloty is neither bought nor sold on a sustained basis due to persistent fears of intervention. The central bank will do everything it can to prevent the zloty from adverse currency moves in order to avoid additional imported inflation.

Wide trading range expected

Rate jumps (in both directions) are to be expected again and again for the rest of the year, but analysts are currently not expecting any major trend to develop in 2022. A trading range of 4.6000 – 4.8000 is expected, with high probability that we leave this range in one or the other direction for a short time period.

Support 4,6500
Support 4,6000

Resistance 4,7300
Resistance 4,8000

The chart below shows the EUR/PLN trading range expected by analysts:

Source: TradingView

Rate moves beyond the 4.6000 to 4.8000 trading range should not last too long. The risk of currency interventions is constantly present and a further increase in interest rates is considered very likely.

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Disclaimer:
Please note that this elaboration was completed on 13/05/2022 09:59 CET.
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