Monday, 12 October 2015 20:01
BUDAPEST/WARSAW: The zloty firmed slightly on Monday as Poland’s healthy economic growth outlook offset policy uncertainties over looming elections, while most Central European assets moved little.
Polls in Poland suggest that opposition Law and Justice Party (PiS) will win elections on Oct. 25. Finance minister Mateusz Szczurek said PiS’ economic and fiscal promises threaten to harm local markets and government finances.
But for the time being, markets seemed to ignore these concerns, and the zloty firmed 0.2 percent against the euro to 4.218 by 1356 GMT, with investors on the sidelines and trading volatile.
Analysts predicted in a Reuters poll last week that economic growth and stability could help the zloty gain by over 4 percent against the euro in the next 12 months.
“We know that the opposition wants to change some things but we are uncertain what exactly, when and how they want to do it,” said Piotr Poplawski, analyst of BGZ BNP Paribas in Warsaw.
“PiS recently said they need a few weeks to decide what changes to introduce, so I expect stronger (currency) moves only after the election,” he added.
Many investors are bored with speculation about PiS policy, analysts said. The party said on Saturday that the tax changes it planned, including new taxes on banks and big retailers, would add up to 31 billion zlotys ($ 8.35 billion) to annual government revenues.
But the total cost of PiS’ election pledges could be between 50 billion and 200 billion zlotys, RBS analysts said in a note.
“The party will likely have to scale down on its promises when it comes to implementation,” they added.
Elsewhere, Romania’s leu eased 0.1 percent against the euro after figures showing that Romania’s annual inflation stayed deep in negative territory in September, at -1.7 percent and industrial output fell 0.5 percent in August from the previous month.
“The central bank should remain in easing bias by cutting reserve requirement ratios, thus supporting the short end of the Romanian leu yield curve, provided that public sector wage negotiations don’t get out of control,” ING Bank analysts in Bucharest said.
The forint traded at 310.25 against the euro, up 0.3 percent, after briefly piercing a resistance level at 310 and touching a 3-week high.
A surge of German utilities shares helped Czech energy group CEZ shares rebound and jump 4 percent to a 3-week high.
