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Polish Zloty to Strengthen From Q4 on Expected Dollar Weakness, BofA Says
Bank of America analysts predict the Polish zloty (PLN) will begin to appreciate starting in the fourth quarter, primarily driven by an anticipated weakening of the U.S. dollar. The bank maintains its bullish outlook on the Polish currency, expecting a broader decline in the dollar to provide support for the zloty against major currencies after the third quarter.
Central Bank Policies Priced In
Regarding the euro-zloty (EUR/PLN) exchange rate, Bank of America stated that the interest rate differential between the National Bank of Poland (NBP) and the European Central Bank (ECB) is unlikely to be a significant driver. According to the bank, market pricing has already factored in the expected hawkish monetary policy stances from both central banks.
This suggests that future interest rate decisions, unless they deviate significantly from current expectations, may have a muted impact on the currency pair's direction.
Downside Risks Limited
AdAnalysts at the bank also noted that near-term downside for the zloty appears to be limited. This is partly due to market concerns about potential foreign exchange interventions by the Bank Gospodarstwa Krajowego (BGK), Poland's state development bank, which could be deployed to support the currency.
Key takeaways from the BofA analysis include:
- The Polish zloty is forecast to strengthen from Q4 2024.
- The primary catalyst is an expected period of U.S. dollar weakness.
- The impact of NBP vs. ECB rate policy on EUR/PLN is seen as minimal.
- Fears of potential FX intervention are providing a floor for the zloty in the near term.
Bank of America did not provide a specific price target for the EUR/PLN pair or a detailed forecast timeline beyond the fourth quarter.
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