The Monetary Policy Council changes the rules of the game for the zloty

Wednesday morning is marked by the weakening of the zloty to the basket of currencies. For the euro you had to pay over 4,46 PLN, and the dollar cost over 3,96 PLN. Thus, the process that started yesterday is being continued. However, its reasons are slightly different.

Monetary Policy Council for the weakening of the zloty

This morning the Polish currency is mainly harmed by deterioration of moods in global markets, and its weakening is amortized by a slight increase in prices EUR / USD. Yesterday, however, the zloty was hurt by a fall in the EUR / USD exchange rate, compared with the dissatisfaction of the Monetary Policy Council (MPC) with a strong zloty. With this last thread, it is worth staying for longer, because the Council changed the rules of the game a bit.

However, before it comes to the MPC, a glance at the EUR / PLN and USD / PLN daily charts. In the first case, the balance of power currently supports further increases, after declines in the second half of May and the first days of June slowed around PLN 4,37, from which a strong counterattack of the demand side took place. Currently, the road is open to 4,50 PLN.

EUR / PLN chart, D1 interval. Source: MT4 Tickmill.

The change in the balance of power is also visible on the USD / PLN daily chart. Only that so far we can talk about stopping the falls and their low probability of continuation in the third decade of June. There are no demand signals on the chart. At least until the USD / PLN exchange rate stands out from the visible consolidation in the range of 3,8866-3,9774 PLN. If it succeeded, then the dollar will not only return above the PLN 4 barrier, but will also attack around PLN 4,05-4,06.

Chart USD / PLN, D1 interval. Source: MT4 Tickmill.

Returning to yesterday's MPC meeting, the Council did not change interest rates and declared that it would continue open market operations and purchases of treasury securities. And that wasn't a surprise. References to the zloty were a surprise.  The statement after the meeting contained the sentence:

"The pace of economic recovery may be (...) limited by the lack of a clear adjustment of the zloty exchange rate to the global shock caused by the pandemic and the loosening of the NBP monetary policy".

This directly suggests that the Monetary Policy Council is not satisfied with the current relative strength of the zloty. And this may work against him in the coming weeks. Especially since some market participants directly assume that there may even be intervention in the future NBP in order to weaken the zloty if it strengthened excessively.