Important pound, weaker zloty (Daily analysis 16.11.2018)

16.11.2018 13:22|Marcin Lipka

The absence of a vote of no confidence in the UK Prime Minister does not mean that the problems with the Brexit are smaller than they were yesterday. The weakening of the zloty may be a result of rumours about the resignation of the President of the National Bank of Poland. The EUR/PLN is around 4.31, and the dollar still close to 3.80.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

  • A lack of macro data may noticeably impact the analyzed currency pairs.

Great Britain still in limelight

After yesterday's strong pound drops in the global market, today's rebound is symbolic. The GBP/USD is still close to 1.2800. However, the lack of sterling's response is justified. It is very difficult to find a solution that would reduce the negative political factors and, consequently, reduce the economic risks associated with Brexit.

Michael Gove, one of the key members of the administration of Prime Minister Theresa May, will remain in government and may be a new minister for Brexit. His views assume that, after a transitional period, Britain's relationship with the EU would be weaker than was negotiated in an agreement between the government and the EU. This, of course, means resuming talks with Brussels, to which EU representatives are unlikely to agree. It would also be worse for the British economy itself.

Gove, as a hypothetical secretary for Brexit, may also decide to keep the government's current position and procedures in parliament for the current plan. However, given the estimates of parliamentarians' support for these solutions (strong opposition from the conservatives themselves), it is practically certain that the plan will not come to life in the House of Commons. If this had happened, the risk of Brexit without a contract would have increased significantly, which means that downward pressure on the pound would have increased. Such a development would result in the collapse of the May government, new elections and an increase in uncertainty about the future state of the economy.

Some observers may believe that the difficulties in gathering enough votes to conduct an internal non-confidence vote (among parliamentary representatives of Tory) are positive information. However, these reports can also be interpreted negatively. Insufficient opposition to May or difficulties in finding a suitable candidate can only prolong the agony of the current administration and limit the preparation time for a new Brexit plan when the current one is likely to be rejected by the House of Commons.

So currently it is difficult to find a positive solution for the sterling. On the horizon, one can see practically the same dangers. As a result, pressure on the pound against most currencies should continue, and the risk of a deepening of falls is now very much higher.

Zloty weakening

The national currency is still relatively stable, although it was weakened around the midday. The EUR/PLN exchange rate reached around 4.31, and drops in relation to the forint amounted to about 0.5%. This is probably related to the spread of rumours concerning the hypothetical resignation of Adam Glapinski, President of the National Bank of Poland. This is the information provided by today's "Fakt". Prof. Glapinski denied these reports, but some investors may be afraid of realising this scenario.

These hypothetical events seem to have little impact on monetary policy, and one might even risk saying that the new head of the MPC would probably be less dovish than Glapinski. This could support the zloty. Generally, even taking into account the whole context of a hypothetical resignation, this should not have a serious impact on the Polish currency. Also in the coming hours the euro and the dollar will remain close to the boundary of 4.30 and 3.80 PLN, respectively, rather than deviating more clearly from these levels.


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This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

See also:

15 Nov 2018 16:10

Pound in the limelight (Afternoon analysis 15.11.2018)

15 Nov 2018 13:37

Pound under significant pressure (Daily analysis 15.11.2018)

14 Nov 2018 16:26

Stable zloty, weaker dollar (Afternoon analysis 14.11.2018)

14 Nov 2018 13:20

Surprisingly good data from Poland (Daily analysis 14.11.2018)

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