Strong data herald a strong zloty [EUR / PLN analysis]

The data published today suggest that the post -andemic acceleration of economic growth in Poland will be very strong, and along with it, inflationary processes will intensify even more. It all sounds like the zloty strengthening.

Situation on EURPLN

The zloty depreciated against the main currencies on Wednesday in response to rising risk aversion and decrease in EUR / USDand also continuing to correct its strong appreciation in the first days of April. At 16:40 the EUR / PLN exchange rate was at the level PLN 4,5575 (+0,5 gr) and USD / PLN PLN 3,7915 (+0,9 gr).  

EUR / PLN daily chart. Source: Tickmill

In Wednesday's behavior of the zloty there is no impact whatsoever published this morning by Central Statistical Office a series of great data from the Polish economy. Nevertheless, it is very difficult to ignore them, as they constitute a strong foundation for the future strengthening of the domestic currency.

In March, producer prices rose from 2,2 percent. up to 3,9 percent year on year, exceeding analysts' expectations at 3,5 percent. This is the highest producer inflation in Poland since April 2017 and another recent inflation surprise in the data.

The data on salaries in companies was also a big surprise. In March, they unexpectedly jumped by as much as 8 percent. year on year, compared to 4,5 percent. in February and against the forecast at the level of 5,5 percent. It was the best result since January 2012. 

However, the biggest surprise was industrial production data. This, partially supported by the base effect, increased by as much as 18,9 percent. per year. This is a level that has not been viewed since 2006. Meanwhile, the consensus was on the level  13,1 percent, and in February production grew only by 2,7 percent. 

The published data suggest that the economy is gaining momentum and that after the lifting of pandemic restrictions, which should take place in May, it may even explode. Along with it, prices will shoot, which even in the case of such a dovish Monetary Policy Council, must start a discussion on future interest rate hikes. 

A strong economy, rapidly accelerating inflation and the discussion about interest rate hikes are an ideal environment for the strengthening of the zloty. It is worth preparing for this scenario, because the scale of its appreciation may be large, and the EUR / PLN exchange rate may test the forgotten area of ​​PLN 4,30 already in summer.