Further Weakness Ahead

Before the recent EM sell-off we were suggesting that the Polish zloty bull run had nearly run its full course, and the unit has certainly had a rough time in recent weeks. Now flirting with a test of the key PLN4.0000/EUR psychological level, a move to PLN4.1500/EUR or even PLN4.3000/EUR can not be ruled out. Aside from domestic political ructions, the key risks to the zloty are a disorderly decline in the Hungarian forint, tightening global liquidity, and the European Central Bank's seemingly poor ability to communicate the direction of monetary policy. However, we are not anticipating a bear market

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