Polish Zloty: Policy Divergence Weighs on PLN vs EUR – ABN AMRO

ABN AMRO analyst Georgette Boele notes that the zloty is under upward pressure against the euro due to a clear divergence in interest rate expectations between the eurozone and Poland. This view aligns with recent observations from multiple institutions on Central and Eastern European currency markets, reflecting that diverging monetary policy outlooks have become a key driver of the currency pair's movement.

**Policy Tone Divergence Worsens Zloty Weakness**

The National Bank of Poland has recently struck a distinctly dovish tone, to which markets have reacted sensitively. According to ING strategists, the market has almost fully priced in one full rate cut, with the probability of easing beginning at the September meeting estimated at over 50%. In contrast, eurozone rate expectations remain relatively stable. This narrowing in rate differentials is directly reflected in exchange rate models. ING's model shows the fair value of EUR/PLN is closer to 4.340, with risks tilted to the upside. The dovish stance is expected to keep the zloty under sustained pressure for a longer period.

**Regional Currency Performance Diverges**

Among Central and Eastern European currencies, the zloty stands out for its weak performance, while other currencies are supported by their respective central banks' hawkish stances. ING maintains a constructive view on the Czech koruna and the Hungarian forint, noting that the Czech National Bank's hawkish posture and the forint's resilience in absorbing external shocks provide a buffer. However, the broader CEE FX market may still face near-term pressure, and the zloty's weakness could be amplified amid shifting global risk sentiment.