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PLN Weakness and Global Risk Off Leave Polish Equities Vulnerable

POLAND
  • Renewed political tensions in recent weeks have left CEE currencies vulnerable, particularly against the US Dollar with participants fleeing to risk off assets to hedge against the rising market uncertainty
  • The PLN weakness combined with the global risk off environment in the past month has led to a significant surge in implied volatility in Polish risky assets, with the WIG20 index trading nearly 30% below its October 2021 high.
  • The chart shows that periods of sustain PLN depreciation have generally coincided with falling equity markets (and vice versa) in the past cycle.
  • WIG20 is approaching key support at 1,800, a break below that level would open the door for a move down to 1,718.50 (61.8% Fibo retracement of the 1,248.80 – 2,478.60 range).

Source: Bloomberg/MNI

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  • Renewed political tensions in recent weeks have left CEE currencies vulnerable, particularly against the US Dollar with participants fleeing to risk off assets to hedge against the rising market uncertainty
  • The PLN weakness combined with the global risk off environment in the past month has led to a significant surge in implied volatility in Polish risky assets, with the WIG20 index trading nearly 30% below its October 2021 high.
  • The chart shows that periods of sustain PLN depreciation have generally coincided with falling equity markets (and vice versa) in the past cycle.
  • WIG20 is approaching key support at 1,800, a break below that level would open the door for a move down to 1,718.50 (61.8% Fibo retracement of the 1,248.80 – 2,478.60 range).

Source: Bloomberg/MNI