EUR/PLN likely to trade around 4.23 by end-2017, says Lloyds Bank

The EUR/PLN pair appears to have formed a base at 4.15 in May, at least temporarily. In recent weeks, the pair’s consolidation closer to the 4.25 levels brings the currency in line with current fair-value estimates, noted Lloyds Bank in a research report.

Currently, a hike in the interest rate by the National Bank of Poland appears off the cards until 2019, but with the policy rate set at 1.5 percent, the Polish zloty gives an attractive carry as compared to the EUR. Furthermore, a tight labor market, reflected by considerable wage growth of 5.4 percent year-on-year in May, leaves the bias for an early tightening in policy.

This in itself should leave the Polish zloty well supported in the forecast period. Thus, there is some scope for a modest rise in the PLN from recent levels. Still, the baseline forecasts are not without risks given the likely negative effect of unorthodox policies of Poland’s ruling law and Justice party on economic growth.

According to Lloyds Bank, the EUR/PLN pair is likely to trade around 4.23 by the end of this year at around 4.20 by the end of next year.