ABN AMRO’s Georgette Boele reports that the Polish złoty (PLN) has weakened against the euro (EUR) due to diverging interest rate expectations between the National Bank of Poland (NBP) and the European Central Bank (ECB) [1]. Since the start of June, the PLN has depreciated by 3% against the euro, reflecting market reactions to anticipated monetary policy moves [1]. The NBP recently kept its policy rate unchanged at 3.75% and is reportedly divided on the possibility of a 25 basis point rate cut after the summer [1]. In contrast, ABN AMRO expects the ECB to hike its deposit rate once more, reaching 2.5% [1].
This divergence in policy outlooks has prompted ABN AMRO to upgrade its EUR/PLN forecasts for the year, anticipating further weakness in the złoty if the NBP adopts a more dovish stance than currently expected [1]. Specifically, Boele notes that if the NBP signals increased dovishness, the EUR/PLN exchange rate could move towards 4.40 [1].
Interest rate expectations in both regions remain a key driver for the EUR/PLN currency pair, with the prospect of the two central banks moving in opposite directions exerting additional pressure on the PLN [1].
CONCLUSION
The Polish złoty has come under pressure due to diverging monetary policy expectations between the NBP and the ECB, leading ABN AMRO to revise its EUR/PLN forecasts upward. Market participants are closely watching for further signals from the NBP, as a more dovish tone could result in additional PLN weakness.