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PLN/EUR: I Take A Bearish View

May 03, 2020 1:31 PM ET
Discount Fountain profile picture
Discount Fountain


  • The Polish zloty has seen a strong decline against the euro.
  • Economic growth in Poland is forecast to weaken considerably.
  • I take a bearish view on the Polish zloty at this time.

The Polish zloty has taken a hit against the euro since mid-March. However, we see that the currency has not rebounded, unlike other European currencies such as the British pound and Swedish krona.

Source: investing.com

When I last covered the PLN back in December, I argued that there was limited room for upside in the currency. Even when the National Bank of Poland had been forecasting 4.3% YoY growth for 2020, no changes in rates were expected until late 2021 at the earliest.

Needless to say, the growth forecast made by the central bank last year will invariably be revised lower as a result of the COVID-19 pandemic. Moreover, the zloty is treated as an emerging market currency for all intents and purposes, with the zloty often seeing a strong surge upwards during periods of heightened risk appetite.

Given the combination of much weaker growth forecasts for the economy ahead, coupled with a dampening of risk appetite, it is little wonder that we have not been seeing growth in the zloty.

The weakness has been exacerbated by the fact that the National Bank of Poland has had to cut rates by 0.50%, with the reference rate now standing at 0.50% and the deposit rate standing at 0.00%.

The central bank forecasts that markedly weaker price growth will materialize as a result of a fall in commodity prices and lower domestic demand. Even with the cut in interest rates, there remains the possibility that inflation rates will end up falling below the central bank’s target. If this happens, then negative rates cannot be ruled out, and this is likely to have a further depreciating effect on the Polish zloty.

The World Bank also forecasts that GDP growth in Poland is expected to drop from 4.1 percent in 2019 to 0.4 percent

This article was written by

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I am an independent investor with an interest in analyzing stocks across the consumer, finance, telecommunication, and travel sectors. As a data scientist, I also have a great interest in using data tools to better understand a company's financial position.Some examples include:- Aggregating quarterly churn and ARPU data for Deutsche Telekom (DTEGY) and analysing trends over time using SQL: https://seekingalpha.com/article/4516805-deutsche-telekom-growth-potential-remains- Building a Monte Carlo simulation in Python to analyze loss ratios for Zurich Insurance Group (ZURVY): https://seekingalpha.com/article/4459821-zurich-insurance-stock-solid-insurance-company-still-faces-risks- Examining ADR and RevPAR trends by brand for Hilton Worldwide Holdings (HLT) using SQL: https://seekingalpha.com/article/4517248-hilton-worldwide-holdings-an-analysis-of-adr-and-revpar-trendsDisclaimer: All of the author's articles are written on an "as is" basis and without warranty, with no guarantee of accuracy or completeness. They represent the author's opinion only and in no way constitute professional investment advice. It is the responsibility of the reader to conduct their due diligence and seek investment advice from a licensed professional before making any investment decisions. The author disclaims all liability for any actions taken based on the information contained in any articles published.

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