Zloty Finds Poise After Off'l Flags Discontent With Scale Of Recent Depreciation

The zloty reverses earlier losses as Pawel Borys, an aide to Prime Minister Mateusz Morawiecki and head of state development fund PFR, told Bloomberg that the domestic currency has weakened beyond the optimal level and the central bank should consider the impact of its decisions on the exchange rate going forward. EUR/PLN last deals at 4.6441, down 150 pips on the session.

• Borys said that "the government has instruments that have already been effective in 2022 in striving to make the exchange rate optimal," effectively raising the prospect of an intervention. According to the official, the optimal level of EUR/PLN is 4.40-4.60.
• This is the first verbal intervention by a Polish official since the NBP's 75bp rate cuts last week sent the zloty tumbling. Members of the dovish majority in the MPC and government officials had so far been playing down concerns about PLN depreciation.
• However, there has been speculation that the sharp sell-off over the past few days could prompt a reaction in the form of an NBP or BGK intervention. BofA yesterday circulated a note in which they recommended closing long positions in EUR/PLN in anticipation of an imminent intervention.
• The next risk factor for the zloty will be the release of July current account balance at 13:00BST/14:00CEST. Strong outturns on that front were seen as one of the sources of zloty strength in 2Q2023.