The scale of zloty depreciation does not worry the NBP

The zloty is the weakest against the euro and the US dollar since April. In relation to the franc or pound, we see levels not seen since the first quarter of this year. The scale of depreciation is huge, although the National Bank of Poland does not show any major concern about it. This week, the PLN's strengthening over the last few months was quickly squandered.

Further interest rate cuts in Poland are highly probable, which it will not support our currency. If the mood on global markets deteriorates, our currency may find itself in even greater trouble. It can be said that the market has valued credibility our central bank.

A speech with an election campaign in the background

Professor Adam Glapiński tried to defend Wednesday's decision at yesterday's conference. Recall that interest rates were cut by 75 basis points. There were also political "excursions" and references to the election campaign we are in. The President of the NBP tried to emphasize the independence of the institution. However, the unpredictability of the central bank's decisions is high and this is seen by the whole world and is priced in by the markets.

Previously, it was emphasized that the reductions would be 25 basis points. The reality turned out to be completely different. Despite the comparisons in Professor Glapiński's words with Christine Lagarde, the head of the ECB, the press conference and the decisions taken earlier by the NBP in no way resemble those seen in Western Europe.

All the time, the president of the NBP tried to highlight the success he called inflation drop from record levels of over 18%.. However, communication with the market leaves much to be desired.

We must take into account the fact that price levels are getting higher oilcaused by the decisions of Russia and Saudi Arabia, combined with a much weaker zloty, may in the medium and long term cause that inflation will be "bumped" and NBP estimates may not come true. Therefore, it may take much longer for price growth to return to the NBP target.

NBP prefers a stronger zloty...

The zloty has lost 14 cents against the euro since the beginning of the week, and almost 19 cents against the dollar. The scale is therefore huge, but it was called minor by the National Bank of Poland and emphasized that it would actually have little impact on CPIs. Prof. Glapiński mentioned that the NBP prefers a stronger zloty because it helps in the fight against inflation. I see some inconsistencies here and I assume I'm not the only one.

I also believe that the decline in the credibility of the central bank is also reflected in the decline of the WIG20 index, which gathers largely foreign capital. Investors withdraw their money from a place where they are not convinced and where they see greater risk.

From a technical point of view, WIG20 found itself in a difficult position. There was already a negative signal bottom exit from the growth channel, which lasted from March. The index quickly dropped to 1990 points. Then we observed an attempt to rebound towards 2055 points. On Wednesday morning, the theoretical neck line of a fairly large RGR formation was broken. Its range is 1780 points. On the way, we still have horizontal support around 1900 points. and everything indicates that this is the direction the index is heading.

Source: Łukasz Zembik, OANDA TMS Brokers