UBS revised its quarter-end forecasts for the US dollar against the Polish zloty (), citing a number of factors including the potential challenges in Europe and the Poland from Donald Trump's possible second presidency, strong US economic data, and lackluster European figures.
The new projections see an increase to 4.35 for the first quarter of 2025, up from 4.14, and subsequent quarters show similar upward changes.
The Swiss financial services company expects that the US dealing with its high fiscal deficits and a reduction in Europe's negative factors could lead to a reversal of the recent USD gains. UBS also noted the strong performance of the US dollar following Trump's election, driven by aspects of his pro-growth agenda, potential inflationary effects, and continued strong US economic data.
The US administration's trade policies may initially increase the attractiveness of the US dollar as well. However, UBS expects market focus to eventually shift to aspects of Trump's agenda that could have a negative impact on the US dollar, such as high fiscal deficits and the impact of taxes on US growth. Poland, although it does not have much direct trade with the US, is integrated into the wider European economy and a reduction in US aid and a possible reduction in its commitment to NATO could have consequences to bring her.
In terms of the economic outlook, UBS expects Poland's real GDP growth to be around 3% year-on-year in 2024, with an expected acceleration to 3.5% in 2025 thanks to significant EU funding. The fiscal deficit is expected to remain wide, with the risk of slipping in an election year. Poland's monetary policy has kept the policy rate at 5.75% in January, with the National Bank of Poland (NBP) pointing to a possible stabilization of inflation due to energy prices.
Looking forward to the Polish presidential election, the first round is scheduled for May 18. The result could affect the zloty, with the victory of the candidate of the Civil Platform Rafal Trzaskowski who is expected to give the opportunity to move the main legislation, which could strengthen the currency. On the other hand, a win by a candidate supported by Law and Justice Karol Nawrocki could lead to a legislative deadlock, which could dampen sentiment.
UBS also warns that continued US economic strength and inflation not in line with targets could prompt the Federal Reserve to reassess its rate-cutting path, which could support the dollar for extended period.
Additionally, aggressive trade tariffs with the US may benefit the greenback initially, possibly pushing USDPLN above the 4.40 level. On the other hand, an effective absorption of EU funds or an on-market exchange of that currency among US operations could support the zloty.
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