EURPLN popped upwards today as the zloty weakened following an article by National Bank of Poland Monetary Policy Council member Eryk Lon, who wrote that Poland could move into negative rates if consumer sentiment worsens. The zloty fell around 0.40% against the euro in the 1-day window, doing slightly better than the Czech koruna which dropped over 0.60% vs the euro today.
The MPC member stated that if sentiment worsens significantly amid a second Covid-19 wave, “one should not hesitate and even cut rates to a negative level”. The comment came after several unidentified sources from the Polish government said Poland is considering whether to introduce a state of emergency as a new daily record of coronavirus cases took the total number of infections 130,000.
The EURPLN response to the news was not significant enough to have the pair break outside of its weekly range, but increased expectations of rate cuts and the prospect of a worsening virus situation may pose downside risks to the Polish zloty further down the line.
MPC Member Eryk Lon did acknowledge the government’s awareness of risks of a repeated lockdown, but it will be contingent on the development of the virus situation and in turn consumer sentiment.
EURPLN testing day’s high after negative rate comment NBP MPC member
Author: Ima Sammani, FX Market Analyst
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