The vision of a soft lockdown weighs heavily on the golden

The strengthening dollar and the increase in risk aversion in the global markets translate into a weakening of the zloty, but the vision of a soft lockdown in Poland can really hurt it.

Situation on the EURPLN chart

The first half of Tuesday's session on the domestic FX market was marked by zloty weakening. At noon, the EUR / PLN exchange rate increased by 2,3 groszy to PLN 4,4806, after yesterday the euro was the cheapest in 3 weeks, and at the end of September you had to pay almost PLN 4,60 for it. Other currencies also became more expensive. The USD / PLN exchange rate increased by PLN 3 to PLN 3,8035, and the CHF / PLN exchange rate increased by PLN 2,5 to PLN 4,1740.

On the one hand, the sell-off of the zloty is a correction of its appreciation in recent days. On the other hand, and this is the actual reason for the current weakness of the domestic currency, deterioration of moods in the global markets and the related withdrawal of quotations EUR / USD under $ 1,18.

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

The sell-off of the Polish currency may still gain strength (although not necessarily today) if the financial markets are more frightened by the intensifying coronavirus pandemic in Poland. And above all, when they become scared of the vision of new restrictions related to it.  Such a scenario becomes probable not only because the daily number of confirmed cases in Poland remains high, but also because the Czech Republic is taking this path. Tightening restrictions in the Czech Republic in connection with the coronavirus pandemic, the crown has been pregnant since yesterday. As a result, the EUR / CZK rate broke today above the highs from the second half of September, and the crown is the weakest since the end of May.

The prospect of future tightening of restrictions in Poland, which would have a negative impact on the economy, or even the grassroots self-isolation of citizens, which would have similar effects, creates a risk of weakening the zloty. Therefore, this week we should witness the return of EUR / PLN above PLN 4,50,  which will be accompanied by an increase in the dollar to PLN 3,84-3,85, and the Swiss franc to PLN 4,20.