Local Analysts Suggest Zloty May Soon Recover

Comments released by several local sell-side desks on yesterday's PLN sell-off and the near-term outlook suggest that the move is not seen as a turning point for the zloty.

• ING flag the likely closing of short EUR/PLN positions entered around the parliamentary election in 2023. They cite historical evidence suggesting that even strong zloty depreciation driven by such activity is usually short-lived and followed by strong appreciation. They add that current EUR/PLN levels are attractive for some players, such as domestic exporters, albeit volatility may remain heightened for now.
• Millennium Bank describe the recent swings in EUR/PLN as overextended in both directions, while also pointing to the role of a significant increase in geopolitical risk related to the situation in the Middle East.
• Pekao suggest that the zloty "should return to appreciation" in the long run, despite its recent correction triggered by broader risk-off flows and the currency's earlier strength.
• Santander flag that in their view zloty depreciation should not last long, despite the currency's poor performance on Tuesday amid broad-based demand for USD.