Zloty Corrects Gains With Coalition Talks & Gov't Formation Eyed

EUR/PLN corrects its recent downswing, erasing the entirety of yesterday's losses. Profit-taking might be playing some role in today's move, following the pair's 2.8% sell-off earlier this week in reaction to the result of Polish parliamentary elections.

• The rate last deals +271 pips at 4.4486 as we type. From a technical standpoint, the 50-EMA provides the initial layer of resistance at 4.5423. Conversely, bears look for renewed losses towards Jul 31 low of 4.3986.
• Politics remain front and centre, with the focus moving to the government formation process and the challenges faced by the incoming administration, which will most likely be formed by pro-EU Civic Coalition, Third Way and the Left.
• Rzeczpospolita writes that the pro-EU coalition will have the narrowest time window for rewriting the 2024 budget bill on record and will need to make some difficult decisions in the process.
• Meanwhile, the President is expected to delay the formation of the new government as much as possible, which means that the outgoing Law and Justice administration may rule in caretaker capacity for at least several more weeks.
• POLGB curve has bull steepened today, with yields last seen 2.4-9.6bp lower. Polish FRAs sit marginally lower on the day.