Polish Zloty Faces Downside Risk After NBP’s Dovish Shift, Warns ING

The Polish zloty is facing renewed downside pressure after the National Bank of Poland (NBP) struck a more dovish tone than markets anticipated, according to a note from ING analysts. The currency, which had been trading in a relatively tight range against the euro, now appears vulnerable to further weakness as rate cut expectations build.

Dovish Signals from the NBP

In its latest monetary policy communication, the NBP signaled a growing willingness to consider interest rate cuts sooner than previously forecast. While the central bank has maintained a cautious stance for much of 2025, recent comments from Governor Adam Glapiński and other rate-setters have shifted the narrative. ING notes that the market had priced in a more gradual easing cycle, making the new tone a surprise that undermines zloty support.

The shift comes amid a broader European backdrop of slowing inflation and weakening economic growth. Poland’s economy, while resilient, is not immune to external headwinds, and the NBP appears to be prioritizing growth support over currency stability.

Market Reaction and PLN Outlook

Following the dovish communication, the zloty weakened against both the euro and the US dollar. ING strategists expect the currency to remain under pressure in the near term, with the EUR/PLN exchange rate potentially testing higher levels. They argue that unless the NBP reverses its tone or economic data surprises to the upside, the zloty lacks a clear catalyst for recovery.

“The NBP’s dovish pivot reduces the carry appeal of the zloty and increases the risk of speculative short positions,” the ING note states. “We see limited upside for PLN until the market reassesses the pace of rate cuts.”

ING’s forecast suggests the EUR/PLN pair could trade above 4.35 in the coming weeks, with risks skewed to the upside for the euro.

Implications for Investors and Importers

For foreign investors holding Polish assets, the weaker zloty erodes returns when converted back to stronger currencies. Polish importers, particularly those purchasing energy or raw materials priced in dollars or euros, will face higher costs. Conversely, exporters may benefit from improved competitiveness.

The dovish shift also raises questions about the NBP’s independence and its reaction function in an election year. While Poland’s inflation rate has moderated, core inflation remains sticky, and some economists argue that premature rate cuts could reignite price pressures.

Conclusion

The NBP’s unexpectedly dovish stance has introduced a new source of uncertainty for the Polish zloty. ING’s warning of downside risk reflects a market recalibrating its expectations for Polish interest rates. Investors should monitor upcoming inflation data and NBP speeches for further clues on the pace of easing. For now, the zloty appears set for a period of weakness, with the EUR/PLN pair likely to test key resistance levels.

FAQs

Q1: Why did the NBP turn dovish?
The NBP’s shift reflects slowing inflation and concerns about economic growth. Policymakers are signaling a willingness to cut rates to support the economy, even if it means a weaker currency.

Q2: How low could the Polish zloty go?
ING forecasts the EUR/PLN pair could rise above 4.35 in the near term, with further downside possible if the NBP delivers actual rate cuts sooner than expected.

Q3: What does a weaker zloty mean for Polish consumers?
A weaker zloty makes imports more expensive, which could push up prices for fuel, electronics, and foreign goods. However, Polish exporters and tourism may benefit from increased competitiveness.