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Will the dollar cost more than 4 PLN [ANALYST’S POST-ELECTION COMMENTARY]

The market is calm at the moment. Right after the elections, the zloty remains relatively stable. What impact will the decisions of the new government and the European Central Bank have on the condition of the national currency? Marcin Lipka, Cinkciarz.pl currency analyst comments.

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Right after the elections the zloty remains relatively stable. The euro costs approximately 4.25 PLN and the franc approximately 3.95 PLN. Even though, the experts thought that the creation of an independent government by PiS is theoretically a negative factor for the national currency, an unstable coalition or a minority government, and a danger of earlier elections, would definitely be a worse solution. Past experience of the emerging markets prove that it is better when a leading political force reigns independently rather than shares the power with unstable and smaller parties.

Stabilisation of the Polish currency is also dependant on the degree to which the budget for 2016 will be modified, who will become the minister of finance, and who will be appointed as the members of the MPC. If the deficit on the public finances does not cross 3% of the GDP for the next year, and the new minister of finance objects to unnecessary indebtedness, the pressure on the zloty should decrease. A big question, and a certain danger for the zloty in the forthcoming months, is the announcement of the new Monetary Policy Council members. The term of office for eight out of ten members of the MPC ends at the beginning of next year, and the chairman remains at his post until mid 2016. Most likely, the new monetary authorities appointed by the parliament and the president will be more willing to cut the interest rates even to 1%. If these expectations are fulfilled, and according to the prognoses that the European Central Bank increases the purchase of treasury bonds by the eurozone countries and lower the deposit rate in December, the dollar may cost more than 4 PLN (currently 3.85 PLN) in the first half of next year.

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