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Economists at Credit Suisse think that central bank intervention in the FX market to weaken the PLN will continue to counter steady zloty-appreciation pressures from the balance of payments side, and create low-volatility and tight range trading in EUR/PLN during the weeks ahead. Thus, the EUR/PLN pair is expected to stay in a range between 4.50 and 4.60.

Key quotes

“We now think EURPLN will stay in a range between 4.50 and 4.60 as the central bank’s FX market intervention helps offset steady appreciation pressure on the zloty from the balance of payments side. This standoff is consistent with low-volatility and tight-range EUR/PLN trading in the weeks ahead. 

“We do not see a clear near-term catalyst for markets to expect the central bank to drop this policy. Headline inflation currently sits close to the middle of the central bank’s target range and covid-risks still weigh on the economic outlook.”

“By contrast, a rise in EUR/PLN to levels well above 4.60 in the current conditions would be likely to meet investor-appetite to sell EUR/PLN, as they would wish to position for a return to the widely-viewed central bank support level of 4.50. The main risk to this target range comes from the possibility of changes to the central bank’s FX tolerance levels.”