Above: NMP Governor Marek Belka prompted PLN weakness with a warning on interest rate cuts. (C) Pound Sterling Live 2015.
The Polish zloty (PLN) raced towards fresh highs against sterling, dollar and the euro before a swift reversal took place.
The NBP (Narodowy Bank Polski) announced that interest rates would be left unchanged at 2.0 percent, as expected, but then came the statement all but announcing a rate cut in March.
“The extremely dovish comments issued from Governor Belka yesterday halted the zloty’s climb and eventually weighed on the currency,” says Joe Manimbo, analyst with Western Union.
Manimbo says increased uncertainty in broader markets is not likely to be seen as a positive this morning for CEE currencies, particularly with little on the local agenda to support the zloty.
The British pound has seen strong gains against the PLN through the opening stages of 2015 but the end of January saw a sudden reversal in fortunes.
GBP/PLN subsequently slumped towards 54600 - the January support level. We see the potential for further gains from here, particularly as the prospects of an interest rate cut are further accounted for by currency markets.
Pound Sterling at 7 Year Best Against the Euro
Elsewhere, the pound sterling saw it back at 7-year highs against the euro.
Strong UK data coupled with increased uncertainty over Greek debt negotiations were behind the move higher for sterling.
The PMI services index bounced off 18-month lows seen in the prior month boding well for the economic outlook.
“European importers who forgot that today the Bank of England (BoE) meets to discuss monetary policy can be forgiven. The meeting is expected to yield little in terms of policy change and as a result have zero impact on markets,” Manimbo points out.
Euro Spooked by ECB's Greek Bond Decision
EURUSD dipped sharply late yesterday on news that the ECB had decided to curtail Greek banks’ access to cheap funding.
But the EUR has recovered overnight and is trading back close to levels prevailing late yesterday before the announcement.
"The decision changes little immediately perhaps but pressure on Greek bank shares and bank bonds today clearly shows that investors are wary of the potential impact of the ECB’s decision which clearly turns the heat up on the new Greek government to co-operate with the Troika," notes Shaun Osborne at TD Securities.
Uncertainty has increased a notch at least and despite the EUR’s rebound so far today, the move may not extend that much more for the moment.
"Intraday, we think EURUSD gains will struggle to extend above 1.1480/00," says Osborne.