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Momentum in Equities Remains Firm Despite PLN Weakness

POLAND
  • Interestingly, while PLN has remained cheap against most of the major crosses in the past few weeks (amid dovish NBP), momentum in Polish equities remains firm.
  • The chart below shows the strong co-movement between the WIG20 index and USDPLN (inverted) in the past cycle; periods of PLN depreciation have generally been associated with equity weakness and vice versa.
  • The loose monetary policy run by major central banks (including NBP) has certainly been a major factor behind the strong momentum in equities.
  • However, can the divergence persist in the medium term while major central banks prepare for a normalization (i.e. taper/rate hikes) of their policy?

Source: Bloomberg/MNI

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