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USD/PLN: Polish Zloty Slides on Weak GDP

USD/PLN: Polish Zloty Slides on Weak GDP

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USD/PLN continues to break ground at a 22-year high as traders wager Poland’s weak GDP and high inflation will crush the economy.

A surprisingly strong Consumer Price Index (CPI) print in August caused by Europe’s energy crisis is causing concerns that the National Bank of Poland (NBP) is stuck.

Typically, Central banks hike interest rates to combat inflation. The problem for Poland is that economic growth is slowing rapidly. The Second Quarter Gross Domestic Product (GDP) was much lower than expected at +5.5% (YoY) versus the forecast +8.5%.

While economic activity is slowing, inflation is rampant. The CPI showed prices rose 16.1% year-on-year — the largest increase in 2022. Not to mention that the backward-looking data doesn’t factor in the latest developments in the energy crisis.

Over the weekend, Russian majority-state owned gas giant Gazprom turned off the taps to Europe. Citing unscheduled maintenance, Gazprom announced the immediate (and indefinite) closing of the Nord Stream 1 gas pipeline. However, a Kremlin spokeman suggested the shutdown is politically motivated and could reverse if Europe removes sanctions against Russia.

The impact of closing Nord Stream 1 was immediate. Gas prices shot higher immediately when European power markets opened on Monday. Furthermore, with no end in sight to the supply tightness, we expect European energy prices to remain elevated for some time. As such, Poland’s worst fears have proved true. The country strongly-opposed the Nord Stream project from the outset. Poland argued it would leave the European bloc beholden to Russia, endangering the region’s energy security. Sadly for Europe, the current scenario is playing out exactly as Poland predicted.

With this in mind, the dollar should continue to do well against the Euro, British pound and the Polish zloty.

US Dollar to Polish Zloty Price Forecast

the monthly chart shows USD/PLN is consolidating around the 4.7500 level. Despite forays above the 2000 high of 4.7200, as yet, the rate has failed to decisively clear the resistance.

However, considering the dire economic outlook in Poland, USD/PLN is likely to break higher in the weeks ahead. In this event, the psychological 5.0000 level is an obvious target. Taking this into account, the large Polish population in the US may soon get an even better rate to send money to Poland.

The positive outlook for USD/PLN remains in place as long as the rate is above the 50-Day Moving Average (DMA) at 3.9555 (green). For this reason, a close below 3.9555 flips the outlook to neutral.

USD/PLN Price Chart

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.