What seemed like a distant mirage at Monday’s open is now within reach: the Polish zloty (PLN) may be wrapping up one of its strongest weeks this year. The currency is gaining momentum from a global capital shift away from the U.S. dollar and improving investor sentiment. But is this the end of speculation about the July interest rate decision by the Monetary Policy Council (RPP)? Or rather, the beginning of a period of heightened volatility?
PLN’s Strong Week Against Major Currencies
The Polish zloty made a notable advance against major currencies this week. The most dramatic move came on the USD/PLN pair, where the zloty appreciated by over 10 groszy—mirroring the global retreat from the dollar. The greenback has approached seven-year lows, and a further decline toward PLN 3.60 remains a possibility.
Yet such volatility on USD pairs is no longer unusual. What stood out this week was increased risk appetite, which even shook the relatively stable EUR/PLN pair. The euro lost nearly 5 groszy, dipping to around PLN 4.23, a technically significant level that marks the lower boundary of the sideways trend from May. A clear break below this support could signal a move toward PLN 4.20.
Next week’s key events will be Monday’s Polish inflation data and Wednesday’s RPP decision, which markets widely expect to be a hold. If both unfold as anticipated, local fundamentals could continue to support the zloty. Even in the case of a trend correction, PLN downside may be limited.
EUR/USD at Multi-Year Highs
While local fundamentals matter, the primary driver of PLN moves remains global capital flows—and at the heart of that equation is EUR/USD. This week, emerging market currencies like the zloty have benefited from a broader rotation toward risk. At the core of this trend is EUR/USD, which continued its upward trajectory, testing local and multi-year highs around $1.173 on Friday afternoon.
Interestingly, U.S. consumer spending data failed to reverse investor sentiment. The Fed’s preferred inflation gauge, PCE, rose to 2.3% year-on-year, while Core PCE hit 2.7%. These modest gains are unlikely to sway the Federal Reserve’s outlook and are thus seen more as a pretext than a decisive trigger for market moves.
A growing influence on U.S. monetary policy appears to be President Donald Trump, whose involvement in discussions about the next Fed chair raises concerns about political pressure on the central bank. Any further signs of political interference would be viewed as a negative signal for the Fed’s independence—and by extension, the U.S. dollar.
Author: Adam Fuchs, Currency Analyst at Walutomat.pl
Source: CEO.com.pl – Zloty Gains on Global USD Weakness
Disclaimer: This publication is for informational purposes only. It does not constitute financial or investment advice and should not be relied upon without consulting an independent expert.
