EUR/PLN seen within 4.18/4.23 near term – Danske Bank

Jakob Christensen, Chief Analyst at Danske Bank, expects the cross to gravitate between 4.18 and 4.23 in the short term.

Key Quotes

“At the latest NBP meeting on 11 April, Governor Adam Glapiński signalled an even more dovish stance, suggesting the NBP rate could stay unchanged for the next two years. In the press conference, the governor even hinted that a rate cut is not off the table given the weaker than expected inflation developments. Admittedly actual inflation pressures remain modest, with headline CPI inflation falling to 1.3% y/y in March, down from 2.5% in November (and weaker than consensus of 1.7%). However, this is mainly due to an energy-related base effect and we do expect inflation to pick up from May and onwards. Given the weak inflation print, financial markets have scaled back their rate-hike expectations, expecting the first hike by Q3 19, while we see the hike a bit earlier in Q1 19 (postponing it from December 2018) as we see a slightly faster rise in inflation”.

“After a strong start to the year, the Zloty has been hit by the deterioration in global risk sentiment, weaker than expected inflation prints and a more dovish NBP. Given these factors, we see the range for EUR/PLN moving up to 4.18-4.23 near term. As a result, we have raised our 1M and 3M forecasts for EUR/PLN to 4.18 and 4.16, respectively (previously 4.20 and 4.18). We still expect the strong growth and rise in inflation to give support to the PLN and therefore target EUR/PLN at 4.14 in 6M and 4.10 in 12M (previously 4.12 and 4.08)”.