EUR/PLN: Second wave of COVID-19 underpins the short-term bullish bias – Rabobank

Poland is at war with the coronavirus and, therefore, economists at Rabobank do not expect the EUR/PLN pair to push lower. The cross is trading just above 4.55 while the September high at 4.5970 is the key to watch. 

Key quotes

“If Poles become seriously concerned about their health and impose their own much stringent restrictions on social distancing than the official measures, the second wave may have a similar negative impact on private consumption the first wave had in spring. In fact, it could be worse if death toll rises sharply and sentiment deteriorates significantly.” 

“We remain of the view that it is too early to expect EUR/PLN to start trending lower as the shortterm outlook has deteriorated. The September high at 4.5970 is the key level to watch ahead of the March top at 4.6342.”

“It is also worth noting that remarks from Finance Minister Koscinski imply that the government has a higher tolerance for a weaker currency. Koscinski said that a weaker zloty is a boost for Polish exporters. When Poland’s main trading partners located in Europe are at war with the virus as well, a softer zloty is unlikely to stimulate exports substantially in the short-term.” 

“We are of the view that over the mid-term horizon Poland would benefit from an undervalued currency to gain a competitive advantage over other countries from the region. The CEE region has an opportunity to increase its share in global trade by attracting companies who may be keen to protect against supply chain disruptions by on-shoring back to Europe.”