The surge of the American dollar has caused the USDPLN pair to reach the peak from mid-April, which was also the highest level this year. USDPLN has not been higher than the 4.12 level, and this is not the last point on the road to the weakening of the Polish zloty.
The American dollar is strengthening practically on every possible currency pair. The aforementioned USDPLN pair has reached the maximum levels for this year. Meanwhile, in relation to the yen, the USDJPY pair has reached levels at which Japan had previously decided to intervene in the currency market this year. Inflation in the USA risen in October as expected, expectations for interest rate cuts have increased. The market now prices in a December rate cut with over an 80% probability, previously this was estimated at 70-75%. The number of expected rate cuts has significantly reduced. Currently, it is expected that the rates could go down to a maximum of 3.75% by the end of next year, compared to the current rate of 4.75%, whereas a short while ago the bottom was presumed at 3%. Given the substantial risk of inflation stimulation next year by D.Trump, and the risk of excessive debt, bond yields remain at an elevated level, which currently benefits the American dollar.
“The weakening of the zloty was initiated by the statement made by the President of NBP(Polish National Bank) that there may be interest rate cuts in Poland as soon as March 2025,” Michal Stajniak, deputy director of XTB’s Analysis Department, said in an interview with MarketNews24. “Later, the zloty weakened due to the situation on the EURUSD pair, and the zloty was hit by the ricochet.”
On the other hand, the Polish zloty appears to be more resistant to the global situation than regional currencies such as the HUF or CZK, and at the same time global EM currencies such as MXN, BRL, or CNH.
In the case of the Polish zloty, it is speculated that the moment of interest rate cuts has moved to the second half of next year. A lot of uncertainty also concerns the fiscal situation in Poland. A larger deficit and higher debt than the current state could endanger Poland’s investment position among foreign investors.
A positive factor for the zloty would be slower rate cuts by the RPP(Polish Monetary Policy Council). The NBP’s inflation report, which was already available to RPP members when they decided to maintain interest rates, was supposed to provide more certainty as to when inflation will start to fall and when it will be possible to lower the rates. Two projections were made that differ in what energy price reductions will be maintained next year. A.Glapinski also indicated that inflation projections show a decrease to the goal in 2026, assuming the current interest rates are kept. This theoretically indicates a slightly more hawkish wind from the Council. Apart from the issue of regulated prices, RPP members point out a significant role from fiscal policy, which is currently quite expansive and may make it difficult to reach the target for inflation.
The freezing of prices was supposed to be temporary, this artificial state had to end and it was known that it would increase inflation. If energy carrier prices for households are freed up, with a complete withdrawal from protective measures from January 1, 2025, inflation will noticeably increase at the beginning of next year to 6.6% in the first quarter and 6.3% in the second. If price freezing was continued, inflation growth in early 2025 would be smaller: 5.3% in the first quarter and 5.1% in the second. For the fourth quarter of 2024, the NBP forecasts an average inflation level of 4.8%. Regardless of the variant of the forecast, inflation climbs to the peak in the first quarter of 2025, then falls. In early 2026, inflation is expected to drop to around 3%, and in the second half of 2026 to the inflation target of 2.5%. The next NBP projection (March next year) may prove to be a turning point for the RPP.
“However, maintaining higher interest rates by the RPP may turn out to be insufficient to improve the condition of the zloty due to the economic situation and the increasing country’s debt,” comments XTB expert.
The NBP in its new projection assumes that Poland’s GDP in 2024 will grow by 2.7% year-on-year, by 3.4% in 2025, and by 2.8% in 2026. These forecasts are worse by 0.3-0.4 percentage point than in the previous, July projection, where readings for 2024-2026 were predicted at 3%, 3.8%, and 3.1% respectively.
At this point, it seems that the levels of 4.10 PLN per dollar are not yet the peak. In the near future, the 4.10-4.15 level should be at play.
“This is my basic scenario for the zloty until the end of this year,” summarizes Michal Stajniak from XTB. “However, next year is currently associated with great uncertainty, due to the start of D.Trump’s presidency, Fed decisions, but also RPP decisions.”
Source: https://managerplus.pl/co-dalej-z-kursem-zlotego-prognozy-rpp-i-scenariusze-dla-usdpln-na-2024-rok-67709
