Zloty Stabilises, WIG20 Extends Gains

The zloty pauses its advance, with EUR/PLN consolidating a 1.2% loss registered this week. The pair moved through key support from Jan 22 low of 4.3447 a couple of days back, which completed the formation of a double-top pattern, suggesting that the earlier bullish correction has run out of steam. The rate last deals at 4.3179 and bears set their sights on Dec 13 low of 4.2935.

• The WIG20 Index remains on a tear, adding 1.6% this morning on top of decent gains posted earlier in the week. The index may have drawn some support from reports of the new government starting to purge the management boards of state-owned enterprises of the appointees of the previous administration. The equity benchmark is approaching cyclical highs printed on December 28 at 2,381.
• Pekao write that EUR/PLN touched 4.31 and continued move to the downside may prove difficult. ING concur that zloty appreciation may slow in the coming days, but they still see EUR/PLN easing towards 4.30 within a week or two and towards 4.25-4.20 over the medium term.
• EUR/PLN 1-week implied volatility has ticked away from recent lows ahead of next week's NBP rate decision.