Zloty Loses Ground, President Signs Off On Controversial Law

EUR/PLN has ticked higher, as the zloty might be facing some political headwinds. The rate sits at PLN4.5305, up 128 pips on the session. A clean break above the 20-EMA/May 18 high at PLN4.5349/4.5547 would fuel hopes for firmer gains. On the flip side, bears look for a dip through recent lows (PLN4.4784/67) before targeting Jun 7, 2021 low of PLN4.4360.

• The US expressed concerns over new legislation allowing Poland's parliament to question opposition leaders over their role in "Russia's political influence" in the country ahead of the upcoming general election. The move will further polarise Poland's political scene and may fuel tensions with the US and EU over their rule-of-law concerns. The creation of the special parliamentary investigative committee was expected as the ruling party seeks to secure re-election for another term.
• Local analysts have flagged the continued doublespeak from NBP officials, after Ludwik Kotecki (hawk) said that there is no room for rate cuts this year, while Gabriela Maslowska (dove) cited zloty appreciation as a factor increasing the likelihood of monetary loosening. Local sell-side desks are divided in assessing these comments. Santander write that "rate cuts may begin only around half-2024" amid a very tight labour market. Millennium Bank "partially support" Kotecki's opinion and pencil in 150bp worth of cuts starting in 2024, with risks skewed to the upside. By contrast, Alior Bank point to an apparent dovish shift in recent NBP communications, while Pekao believe Maslowska expressed the opinion of the NBP majority and we will see rate cuts by the year-end.