Monday morning brought a clear correction to the pre-election weakening of the Polish zloty, which has effectively returned to its previous levels. The same cannot yet be said for the Romanian leu. Meanwhile, Portugal, despite holding elections, may still struggle to form a stable government.
Zloty Strengthens After Initial Volatility
Throughout the election period, it appeared that investors were largely ignoring the political developments in Poland. There was no visible impact of the campaign on the zloty’s performance. However, nerves finally gave out on Friday, triggering a surge across various currency pairs against the Polish currency. By Monday, markets had calmed, and the zloty returned to its pre-spike levels – suggesting that the election results reassured investors.
The euro, for instance, jumped from around PLN 4.25 to PLN 4.29, before sliding back to PLN 4.25. The U.S. dollar rose from PLN 3.19 to PLN 3.83, only to drop again due to movements in the EUR/USD pair. Similarly, the Swiss franc rose from PLN 4.54 to PLN 4.58, then returned to previous levels. The British pound showed a nearly identical pattern, from PLN 5.05 to PLN 5.10, then back again.
The similarity and scale of these fluctuations across different currencies indicate that the Polish zloty itself was the driver of these market moves.
Romanian Leu Struggles to Recover
In contrast, the Romanian leu has not bounced back in the same way. Following the first round of elections, the leu suffered a significant sell-off. To put this in perspective: over the past two years, the total fluctuation range of the leu was smaller than the single-day swing seen right after the election.
Many analysts believed that with the threat of a far-right victory avoided, the currency would rebound. While a partial recovery occurred, it was only halfway to pre-election levels – and markets appear to be stabilizing at this lower point. Today’s trading again suggests a retreat from the leu, indicating that confidence has yet to fully return.
Portugal Faces Political Deadlock After Snap Elections
This weekend saw more than just presidential elections. Portugal held a snap parliamentary election, where the current prime minister’s party slightly improved its position but still failed to secure a majority. Even with a potential coalition partner, the numbers don’t quite add up.
As a result, Portugal – like many other countries – finds itself in political limbo. While a minority government could be an option, it’s worth noting that the previous one collapsed. A few extra seats may not be enough to ensure political stability.
What does this mean for the markets? On its own, Portugal is unlikely to trigger significant shifts in the euro. However, if a weak government is forced to uphold costly campaign promises to survive, Portugal could become a long-term burden for the eurozone.
Macroeconomic Data to Watch Today:
- 2:30 PM (CET) – Canada: Consumer Price Index (Inflation)
Author: Maciej Przygórzewski, Chief Analyst at InternetowyKantor.pl
Source: Manager+
