The zloty is weaker only than the Swedish krona

The zloty has been strengthening for almost a whole month and it seems that further increases may be possible. This month, the world's zloty had only three other currencies ahead of it: the Swedish krona, the Israeli shekel and the Albanian lek. The strength of the currency is, of course, due to investors' hopes for Poland's return to greater integration with the European Union, although in addition we can also see the impact of the lack of willingness to further reduce interest rates in Poland, despite the recent strong drop in inflation.

This month, the Polish zloty has gained less than 6% against the US dollar and is on track to do so the strongest currency in the region. In Europe, among the extended group of major currencies, the zloty was only weaker than the Swedish krona. In turn, around the world, apart from SEK, the Israeli shekel and Albanian leke were stronger. So it is clear that PLN doesn't have much competition in terms of further possible growth. On an annual basis, the situation is slightly worse, but since the beginning of this year the zloty has gained approximately 10% against the US dollar, but only clearly exotic currencies were stronger.

No further interest rate cuts

The reason for the strengthening is, of course, the hope for greater integration with the European Union. It is already known that Poland will receive approximately PLN 5 billion in advance payments from the National Reconstruction Plan. This is, of course, a drop in the ocean, but investors hope so next year all funds will start flowing to Poland, which amount to over EUR 30 billion. In addition, the zloty is maintaining its position due to the recent change in the central bank's communication. This government is no longer so willing to reduce interest rates further. The market does not expect there to be a cut in the next 3 months, but only sees a chance of cutting rates to 5,5% in the next six months. What is important is that interest rates in Poland will remain above those in the United States for now. If investors believe in the further strengthening of the zloty, there will be a chance to attract even more capital to our country.

The end of November is quite calm in terms of macroeconomic readings. The most important thing for the market will be publication PCE inflation from the US next Thursday, but this should not change the attitude of the Federal Reserve. The market is already pricing in the first cut it could take place in May next year. Apart from inflation, we will also know the decision on Thursday OPEC +, which may lead to a rally in oil prices, which is obviously not helpful to central banks still fighting inflation.

Before 10:00 we were paying PLN 3,9728 for the dollar, PLN 4,3476 for the euro, PLN 5,0120 for the pound and PLN 4,5076 for the franc.

Source: Michał Stajniak CFA, XTB