On Monday 11 March, the Polish zloty reached a milestone, strengthening to 4.28 zloty per euro for the first time since February 2020. 

This surge was driven by diminishing expectations of interest rate cuts later in the year and optimism surrounding the release of billions in EU funds for Poland. In recent weeks, the zloty has shown robust gains against other major currencies, such as the US dollar, the Swiss franc, and the British pound.

Analysts at ING attribute the zloty’s strength to several factors, including a weak dollar, waning expectations of National Bank of Poland (NBP) rate cuts in 2024, and the anticipation of EU fund inflows. Additionally, the release of a macroeconomic projection by the Polish central bank, indicating a prolonged timeline for inflation to return to the bank’s target, further bolstered the currency.

On Tuesday, the zloty remained slightly below its previous highs but continued to strengthen against the British pound, reaching its highest level since December of the previous year at 5.01 per pound. This upward trend in the zloty has led to a reduction in expectations for interest rate cuts in Poland, as noted by analysts at Millennium bank.

The strength of the Polish zloty reflects not only the current positive economic indicators but also the resilience and steady growth of the Polish economy over the past two decades. This economic stability has fostered investor confidence and contributed to the zloty’s recent strong performance against major currencies.

Image: Unsplash

Author: Sébastien Meuwissen