Fed’s hawkish stance hits the zloty. EUR/PLN tests resistance levels after the dollar rally
The national currency remained largely influenced by global factors and trends. At the beginning of the week, signals of the finalization of the US–Iran agreement boosted risk appetite, accompanied by a slightly weaker dollar.
In the second half of the week, the trends favoring the zloty reversed due to the hawkish tone of the Fed’s new macroeconomic projections.
They indicated a higher inflation and interest rate path in the US and a stable, relatively high economic growth in 2026–2028. As a result, the market overestimated expectations for Fed rates, even anticipating two hikes by the end of 2026.
This led to a strong dollar appreciation, negative for emerging market currencies, including the PLN.
Under the influence of these factors, EURPLN broke out of local consolidation and on Friday tested around 4.27, where another important technical resistance zone begins.
Euro rate – forecast for the coming days
EURUSD, however, broke 1.15 and tested key support at 1.14, indirectly lifting USDPLN to near March and April highs. Importantly, the dollar index (DXY) found a key point, testing on Friday the upper limit of the long‑term, building mid‑2025 sideways trend (101 points).
We expect Monday’s strong domestic data package to support the zloty in the first part of the week, and EURPLN to stay in the 4.24–4.26 range at least until Thursday, when we will see the May PCE inflation readings from the US.
Expectations about the Fed rate path could significantly influence the dollar trend, and indirectly the PLN.
Depending on the wording of the data, it is possible to shift USDPLN closer to 3.65 if the reading indicates weaker-than‑expected inflation pressure in the US, or a successful attack at 3.75 if inflation surprises negatively.
Bond market
On Friday, domestic government bond yields changed in the -2/+1bp range. In the 10‑year segment, bond yields fell by 2bp to 5.45%, while on major markets German Bund yields rose by 6bp to 2.97%. The US market was closed due to the Juneteenth holiday.
The calm Friday session closed a turbulent week in the interest rate market, featuring both geopolitical events and central bank decisions. A key event for global markets was the signing of a peace agreement between the US and Iran, ending – at least at the current stage – the conflict that investors mainly viewed through the lens of an energy shock driving global inflation. Financial markets discounted further rapid returns of inflation to lower levels in subsequent quarters this week.
As a result, treasury bond yields fell in most markets, and the improvement in global investment sentiment further supported domestic government bonds. At the beginning of the week, the yield on Polish 10‑year bonds broke the 5.60% level, then stabilized near 5.45%. A significant event in the Asian market was the Bank of Japan’s decision on Tuesday to raise the reference rate to 1%, the highest level in over 30 years. In the US, the first appearance of the new Fed Chair, K. Warsha, surprised. Despite leaving rates unchanged, the tone of the conference was perceived as distinctly hawkish, prompting the market to shift expectations for a rate hike by the FOMC from December to October.
We expect that once geopolitical conditions stabilize and a series of central bank decisions are made, investor attention will again focus on macroeconomic data. This should support a sideways trend in the FI market in the coming week.
