Zloty Pares Gains As Concerns About Poland's Spats With EU Institutions Loom

EUR/PLN has now retraced the bulk of its initial downswing (0.55% peak-to-trough) and sits at PLN4.7679, down 61 pips on the session. Concern about Poland-EU tensions might be sapping some strength from the initially buoyant Zloty, while the release of below-forecast CPI data inspired a light downward adjustment to Polish FRA contracts, now mostly unwound.

• The European Commission will sue Poland to the Court of Justice of the European Union (CJEU) after its Constitutional Court ruled in 2021 that some EU treaties are incompatible with the Polish constitution and challenged the primacy of EU law. Poland has since failed to address the Commission's reservations about the ruling. The Commission also says that Poland's Constitutional Court does not meet its standards of an independent and impartial tribunal.
• Separately, the CJEU will tomorrow give its opinion in a case brought against Polish lenders by borrowers who took out loans in Swiss francs. A verdict in favour of the consumers would impose massive costs on the Polish banking sector, which the local financial watchdog estimates at about PLN100bn. This poses a significant risk for the PLN and POLGBs, although market positioning is difficult to gauge.
• Finally, the government is awaiting the publication of President Andrzej Duda's request for the Constitutional Court's assessment of key judiciary reforms needed to unlock EU recovery funds. Poland's EU Minister said today that the government cannot "pressure" the tribunal but will be asking about the timeline of its proceedings and hopes for a quick verdict.