Hi All,
I think we will see the Euro trading at the price of 5 PLN until the end of this year. Here is WHY:
From a fundamental perspective:
Capital in times of panic and distress migrates from emerging markets (Poland is still regarded as such by many investors) toward the US dollar (and other safe currencies such as: JPY, CHF and EUR) -which is then converted into US treasuries.
What is more the Polish Central Bank is launching his own expansionary monetary policy in response to the Corona Crisis. It is not only providing extra liquidity to the banking sector through repo transactions (up to 10 billions PLN a week), but it also lowered the minimum reserve ratio from 3,5% to 0,5%!
This means the PCB will flood the banking sector with funny money which will eventually spill into the market.
The PCB will increase it's balance sheet by about 200 billions, which will be almost 9% of the Polish GDP. In the US Q1 had about the same proportions! This is BIG!
What is more the current interest rate in Poland is at it's historical low: 0,5% which combined with an accelerating inflation (around 5%) doesn't make the polish bond market a tempting destination. During the next waves of market panic the polish Zloty will face a strong devaluation against major currencies.
From a technical perspective:
We just broke through a multi-year consolidation triangle. We completed a 5 Elliot Wave pattern inside it and exploded to the up-side with an enormous volume (green cyrcle) in mid-March. This is extremely bullish!
Prepare for another bull run on EURPLN.
My target: 5 PLN.
I think we will see the Euro trading at the price of 5 PLN until the end of this year. Here is WHY:
From a fundamental perspective:
Capital in times of panic and distress migrates from emerging markets (Poland is still regarded as such by many investors) toward the US dollar (and other safe currencies such as: JPY, CHF and EUR) -which is then converted into US treasuries.
What is more the Polish Central Bank is launching his own expansionary monetary policy in response to the Corona Crisis. It is not only providing extra liquidity to the banking sector through repo transactions (up to 10 billions PLN a week), but it also lowered the minimum reserve ratio from 3,5% to 0,5%!
This means the PCB will flood the banking sector with funny money which will eventually spill into the market.
The PCB will increase it's balance sheet by about 200 billions, which will be almost 9% of the Polish GDP. In the US Q1 had about the same proportions! This is BIG!
What is more the current interest rate in Poland is at it's historical low: 0,5% which combined with an accelerating inflation (around 5%) doesn't make the polish bond market a tempting destination. During the next waves of market panic the polish Zloty will face a strong devaluation against major currencies.
From a technical perspective:
We just broke through a multi-year consolidation triangle. We completed a 5 Elliot Wave pattern inside it and exploded to the up-side with an enormous volume (green cyrcle) in mid-March. This is extremely bullish!
Prepare for another bull run on EURPLN.
My target: 5 PLN.
