Zloty Continues To Lose Shine After Election, Eyes Gov't Formation Process & EU Talks

EUR/PLN extends its correction of a post-election downswing and last deals at 4.4782, up 144 pips on the day. CE3 currencies have come under some light pressure even as the zloty narrowly outperforms in that space. Technically, a break above the 50-EMA at 4.5281 would support the bullish case. Bears see Oct 17/Jul 31 lows of 4.4096/4.3986 as their initial targets.

• President Andrzej Duda resumes his consultations with parties that made it into the new parliament, with various reports pointing to his indecision when it comes to the initial PM candidate, even as the head of state had previously hinted that he would likely ask a representative of the largest party to try and form government.
• Opposition leader and front-runner to become next PM Donald Tusk is in Brussels to discuss the potential for unfreezing EU recovery funds earmarked for Poland. Market participants are on the lookout for hints on whether the transfer of power to a pro-EU coalition could facilitate the release of funds.
• Citi Handlowy write that the zloty started appreciating after October 4 when opinion polls started indicating the potential for a change of the ruling coalition, with possible FX conversions by the Finance Ministry playing a limited role. They see very limited room for PLN appreciation, with investors likely underestimating the challenges facing Poland's economy in 2024.