No Juice Left for Central Europe’s Standout Currency Winner

(Bloomberg) -- Election jitters have started to undermine the biggest currency gain in the European Union’s east this month.

A month before Poland’s parliamentary vote, the zloty is hanging on to an almost 1% advance in September against the euro. The central bank’s record stretch keeping interest rates on hold while the European Central Bank and other regulators cut, has created a relatively attractive policy differential for investors.

But even after Mario Draghi’s dovish salvo last week, the zloty was one of the only currencies in the region to buck emerging-market gains on Wednesday, suggesting to Rabobank’s Piotr Matys that concerns are starting to seep in.

No Juice Left for Central Europe’s Standout Currency Winner

“I expect an attempt for the EUR/PLN pair to break above 4.40 in the coming weeks,” Matys said. That’s 1.4% weaker than the level the currency was trading at on Wednesday afternoon and would mark the zloty’s lowest level in more than a year.

Market unease surrounding the ruling Law & Justice Party’s pre-election spending measures before the vote comes high on the list of Matys’ concerns. It’s joined by trade-war uncertainty and the possibility of a global recession.

©2019 Bloomberg L.P.

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