PLN: EURPLN May End Losing Streak Following Brief Test of 4.20

EURPLN has bounced around 0.4% higher following a test of the 4.20 handle this morning, with the cross potentially set to end an 8-day losing streak and close back above the 2020 low of 4.2036 in the process. Technical conditions remain bearish owing to the sharp sell-off earlier in the month, while the 14-day RSI recently showed at its lowest level since November 2023, indicating that profit taking dynamics may be in play today.

• Outperformance of the zloty compared to its regional counterparts this year can largely be explained by the relative hawkishness of the NBP, but potential optimism that President Trump can deliver on finding a resolution to the Russia-Ukraine war could be providing a further tailwind.
• Meanwhile, options buyers continue to hedge against PLN strength – yesterday 1-month EURPLN risk reversals showed at their lowest levels since May 2024 – while expectations of policy continuity and clarity on the policies of Trump's presidency will be contributing to the turn lower in short-term vols. 3-month implied PLN vols look consistent with the global pullback in options premiums, having showed at their lowest since the onset of the pandemic earlier this month.