FinMin Says Zloty Appreciation Isn't Excessive As EUR/PLN Tests Two-Year Lows

EUR/PLN tested two-year lows at PLN4.4784 but has rejected that level for now; a break here would confirm that the broader downtrend remains intact. The rate last changes hands -152 pips at PLN4.4858 and clean breach of the immediate support area would bring Jun 7, 2021 low of PLN4.4360 into play.

• Finance Minister Magdalena Rzeczkowska played down speculation (originally linked to a Citi research note) that the government might be supporting the zloty by converting more foreign inflows in the FX market. She told Bloomberg that it "isn't exactly the truth" and the Finance Ministry "isn't really present on the market." She added that the government is "quite ok" with zloty appreciation, as the currency is "just getting to the levels from before the war."
• Bank Pocztowy wrotethat today's retail sales data testify to the continued decline in consumer demand, but "there is a question of what will happen to inflation when we see the expected rebound in consumption (in Q3 at the latest), if during the current fall in demand CPI remains far from the inflation target. Even the fact that we are wondering what's the answer to this question closes, in our view, the path to NBP rate cuts at least until the end of the year."
• The Zloty outperforms most its EMEA peers, including both CE3 peers. PLN/CZK topped out at CZK5.2875, briefly piercing resistance from May 16 high of CZK5.2871, the best level in almost 11 months.