Since the US presidential election, the Polish PLN has strengthened against the EUR by 4.8%. This is more than the S&P500 increased during the same period (only +3.47%). Of course, this is not an apples-to-apples comparison.
The realized volatility of the PLN (calculated over the last 3 months) is 3.7% (annualized value), while the S&P500 is 12.7%. This means that the S&P500 is almost 4 times more volatile (risky). So +4.8% in the case of PLN - this is an equivalent of the S&P500 of as much as +11.8%.
The PLN is definitely the strongest compared to other currencies in the CEE region - see Figure 1.
Interestingly, since November 5, 2024, the PLN has been strengthening both when the EURUSD falls and when it rises... see Figure 2 (this is historically unprecedented).
If the main driver of PLN strength is the approaching peace in Ukraine... then in the event of a war breaking out in 2022... PLN has only weakened by 2.2% (apart from the initial spike) - see Figure 3. While this is not directly comparable, it is quite thought-provoking... that the outbreak of war weakened PLN by 2.2% - and the end has already strengthened PLN by almost 5%.
Figure 4 shows CEE currencies since the beginning of the rate hike cycle in the region, i.e. since 22 June 2021. HUF has weakened by 13.6% since then, and PLN has strengthened by 8.5%.
Interest rate cuts (plus expectations regarding the future path of monetary policy) have a significant impact on the strength of CEE currencies - in the case of CZK we do not see such a significant strengthening, but rather weakening since April 2023 - see Figure 5.
Comments