- PLN crumbling on the back of too-soon rate cut from Polish central bank.
- USD/PLN soaring to five-month highs as market punish Zloty.
- PNB Governor Glapinski accused of political manipulation ahead of bitter general election.
The Polish Zloty (PLN) has plunged in value on the back of an unexpected rate cut from the Polish National Bank (PNB). The PNB gave a 75-basis-point cut to the country’s interest rate, down to 6%. Inflation still remains a frontline battle for Poland, and the head of the PNB, Governor Adam Glapinski has been criticized for political motivations behind the move.
Zloty tumbles after rate cut despite high inflation
The PLN is poised for its biggest single-week decline in a year, sending the USD/PLN chart soaring to the 4.3200 region from the week’s opening price around 4.1270. The Zloty has fallen 5% against the Greenback (USD) in market trading.
PNB Governor Glapinski has come under fire for the unexpected rate cut, with criticisms from economists and politicians alike taking turns accusing Glapinski of political motivations. Glapinski is an open supporter of the ruling Law & Justice, a right-wing national-conservative government party.
Poland is facing a tight general election next month, and Glapinski is accused of using the poorly-timed rate cut as a means of providing support for the Law & Justice party by temporarily reducing lending and borrowing costs at the expense of the broader economy.
Flash estimates put Polish inflation in the double digits at 10.1%. During a news conference on Thursday, Governor Glapinski declared that the PNB had achieved “victory” over inflation, citing key price growth figures that the central bank does not currently publish.
The PNB Governor also declined to provide comment on the path of rate cuts in the future, claiming that the Polish central bank had now adopted a “wait-and-see” approach to monetary policy.
The price of 3-month Zloty-Euro (EUR) basis swap contracts exploded nearly 50 basis points higher on the rate cut, reaching a peak of 175 points. It has become increasingly expensive for foreign investors to borrow against the Zloty for the purposes of shorting the currency.
Last year Polish authorities took steps to prohibit shorting the PLN by restricting liquidity, in an effort to put a ceiling on further losses for the beleaguered currency which has lost over half of its value since the 2008 global financial crisis.
USD/PLN 4-hour chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD looks at the RBA for near-term direction
AUD/USD resumed its rebound and briefly surpassed the 0.6600 barrier on the back of the renewed and marked resurgence of the downward bias in the US Dollar. Investors, in the meantime, expect the RBA to keep its rates unchanged on Tuesday.
EUR/USD: Price action hinges on the US election and the Fed
EUR/USD managed to trespass the key 1.0900 hurdle and print new highs following the Greenback’s offered stance as investors warmed up for the US election and the FOMC event later in the week.
Gold trades around $2,730
Gold price is on the defensive below $2,750 in European trading on Monday, erasing the early gains. The downside, however, appears elusive amid the US presidential election risks and the ongoing Middle East geopolitical tensions.
Ethereum Price Forecast: ETH struggles below $2,500 amid State of Michigan pension fund investment in ETH ETF
Ethereum (ETH) is trading near $2,420, down about 1% on Monday, but could bounce off a key descending trendline close to the $2,258 historically high demand zone.
US presidential election outcome: What could it mean for the US Dollar? Premium
The US Dollar has regained lost momentum against its six major rivals at the beginning of the final quarter of 2024, as tensions mount ahead of the highly anticipated United States Presidential election due on November 5.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.