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Accelerating inflation will stop the zloty weakening?
The EUR / PLN pair was attacking levels above PLN 4,66 for the third consecutive day. Is accelerating inflation in Poland will slow down EUR / PLN increases and will be the beginning of the end of this year's weakness of the zloty? It is possible.
Inflation shifts to the next gear
After the EUR / PLN rate surged to PLN 4,6769 on Monday, testing the highest levels in 12 years to go back to PLN 4,6615 at the end of the day, the euro has been trying to continue these increases for two days. And it fails. Levels above PLN 4,66 are eagerly used to sell the common currency and return to the zloty. It was no different today. In the morning the EUR / PLN exchange rate rose to PLN 4,6685, only to move back to the area of PLN 4,6460 later.
EUR / PLN daily chart. Source: Tickmill
Inflation data from Poland helped in this pullback of EUR / PLN. The data is quite surprising. In March, according to the preliminary estimates published by the Central Statistical Office, inflation unexpectedly soared to 3,2 percent. from 2,4 percent YoY in February, significantly exceeding market forecasts of 2,9%. R / R.
Today's data strengthened the pro-inflationary optics even more. It seems likely that inflation will rise to a minimum of 3,5-3,6 percent in April. YoY, and in May it will meet at 4%. and there will be a good chance of exceeding it.
Such a higher inflation path than it could be assumed some time ago should support the zloty. Before that, however, let's go back a few days. The highest EUR / PLN quotations in 12 years are, among other factors, above all an expression of the conviction that the Monetary Policy Council will maintain a lenient monetary policy even despite elevated inflation.
And although today it is still difficult to find a majority in the Council that could vote for a rate hike in Poland in the future, the very discussion of such a scenario is real. Especially in a month or so, when the pandemic restrictions should be lifted and the vaccination program has a chance to accelerate. And it is the awareness of this fact that will prevent the zloty from selling off. Therefore, it cannot be ruled out that the EUR / PLN peak is currently taking shape.
