A strong zloty may discourage you from traveling around Poland

Due to low inflation in the US, the dollar exchange rate fell yesterday below PLN 4. Now it is PLN 3,97 and stays at this level. The zloty is one of the most strengthening currencies this year, gaining 9,3 percent against the dollar and 5,7 percent against the euro. The strengthening zloty may cause more Poles to choose foreign holidays. And this will hit domestic tourism.

Down for the twelfth time

Yesterday the dollar fell below PLN 4 due to falling inflation in the US. US inflation is currently the hottest number in the financial markets. And this is due to the expectations of further interest rate increases. Yesterday it turned out that US inflation fell to 3%.. (for comparison, in Poland it is 11,5%) and it was its twelfth decrease in a row. It surpassed earlier forecasts, and there was a significant drop in service price inflation, which had so far been very worrying for economists. Therefore, we are probably already waiting only one interest rate hike in the US, at the end of July. This prospect caused a drop in US prices bonds and the weakening of the dollar.

However, the dollar would not have cost below PLN 4 if the zloty had not strengthened significantly this year. We currently pay PLN 3,97 per dollar, while at the beginning of the year it was PLN 4,38 (appreciation by 9,3%). At the moment, the euro costs PLN 4,43, and at the beginning of the year it was PLN 4,70 (appreciation by 5,7 percent). This year, zloty is one of the most appreciating currencies in the world. In our region, only the Hungarian forint strengthened more, gaining 6,5 percent against the euro since the beginning of the year.

The zloty is recovering losses

The strength of the zloty results from several reasons. One of them is his earlier weakness in 2022 as he lost heavily due to the outbreak of war in Ukraine. Now, as concerns about the political situation subside, it is recovering. They also matter here announcements of large foreign investments in Polandsuch as Intel, as well as increasing the presence of NATO troops on Polish territory. The zloty also gains after the end of the cycle of interest rate increases in Poland, while rates are still rising in the US, the euro zone and the UK. However, the end of the hike cycle, and even possible rate cuts, may hinder a rapid decline in inflation in Poland. And this may negatively affect the zloty exchange rate in the future.

The strengthening of the zloty during the holidays means that we will pay less for trips abroad and for expenses during them. This may be another problem of the domestic tourism industry, which is losing out because of Poles' concerns about possible recession in the economy. According to the eToro Individual Investor Pulse survey, as many as 38% of investors express concerns about the condition of the Polish economy (a sharp increase from 8% in the previous quarter). If people going on holidays, despite the specter of recession, choose a cheaper offer of foreign trips, e.g. to Turkey or Egypt, this may seriously affect domestic tourism.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.