EUR/PLN Drifts Lower as NBP Holds Steady – Societe Generale

The Polish zloty edged higher against the euro on Wednesday, with the EUR/PLN pair drifting lower after the National Bank of Poland (NBP) held its key interest rate unchanged at 5.75%, in line with market expectations. Analysts at Societe Generale noted that the central bank’s cautious stance is providing a modest tailwind for the domestic currency, though the broader outlook remains tied to global risk sentiment and inflation trends.

NBP Holds Firm as Inflation Concerns Persist

The NBP’s decision to keep rates on hold for a seventh consecutive meeting underscores the bank’s prioritization of inflation control over growth support. Headline inflation in Poland has eased from double-digit peaks but remains above the central bank’s target range, limiting room for policy easing. Societe Generale’s foreign exchange strategy team highlighted that the zloty is benefiting from the relative stability of Polish monetary policy compared to some of its regional peers, where rate cuts have already begun.

EUR/PLN Technical Outlook

From a technical perspective, EUR/PLN has been trending lower since mid-March, breaking below key support levels near 4.30. The pair is now testing the 4.27-4.28 zone, a level that previously acted as resistance during the fourth quarter of last year. A sustained move below this area could open the door toward the 4.24 region, the lowest level seen since early 2022. Conversely, a rebound above 4.32 would suggest the recent downtrend is losing momentum.

What This Means for Investors and Importers

For Polish importers and consumers, a stronger zloty helps reduce the cost of imported goods, particularly energy and raw materials priced in dollars or euros. This dynamic could contribute to further disinflation in the coming months, potentially giving the NBP more flexibility later in the year. For forex traders, the current environment favors a carry-trade strategy, as Poland’s relatively high interest rates offer attractive yields compared to the eurozone’s 4.00% deposit rate.

Broader Market Context

The zloty’s recent gains also reflect a broader improvement in sentiment toward Central and Eastern European currencies, driven by expectations that the European Central Bank may begin cutting rates before the NBP. The divergence in monetary policy paths is a key theme for the region in 2025. Societe Generale’s analysis suggests that while the zloty has room to appreciate further, any escalation in geopolitical tensions or a sudden shift in global risk appetite could quickly reverse the trend.

Conclusion

The EUR/PLN pair is drifting lower as the NBP’s steady policy stance supports the zloty, but the currency’s trajectory remains highly dependent on inflation data and external factors. Societe Generale advises a cautious approach, noting that while the technical bias is bearish for EUR/PLN, fundamental risks warrant close monitoring of central bank communication and global market conditions.

FAQs

Q1: Why did the EUR/PLN exchange rate move lower?
The Polish zloty strengthened against the euro after the National Bank of Poland kept its interest rate unchanged at 5.75%, reinforcing the currency’s yield advantage and signaling a cautious policy approach.

Q2: What is Societe Generale’s view on the Polish zloty?
Societe Generale analysts see the zloty benefiting from the NBP’s steady rates, but they caution that the currency’s outlook is tied to inflation trends and global risk sentiment, making further gains uncertain.

Q3: How does the NBP’s decision affect Polish consumers?
A stable or stronger zloty reduces the cost of imported goods, which can help lower inflation. This benefits consumers by easing pressure on household budgets, particularly for fuel and imported food.