The National Bank of Poland cut interest rates earlier this week, surprising Forex market participants. The Polish zloty remained strong even after the unfavorable policy decision.
The NBP slashed its main interest rate by 0.25 percentage point to 3 percent on May 8. The central bank noted that economic activity was weak both in Poland and across the world, expressing concern that recession in the eurozone continued. The statement, which was released after the policy meeting, said:
In the opinion of the Council, the incoming data indicate that economic growth in Poland remains weak, while inflation decline is stronger than forecasted in the March projection. At the same time, uncertainty about the pace and timing of the expected recovery in the euro area has increased, which can adversely affect economic activity in Poland.
The bank also predicted that inflation will likely remain below the target and such forecasts can be interpreted as a hint on further rate cuts. Usually monetary easing is not helpful to currencies, yet the zloty rallied after the bank’s announcement and continued to be strong today.
USD/PLN fell from the opening of 3.1650 and the daily high of 3.1725 to 3.1622, while EUR/PLN declined from 4.1281 to 4.1240 as of 1:39 GMT today and its intraday maximum was at 4.1336.
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