EUR/PLN likely to face further upside risks in coming weeks, says Commerzbank

The zloty stayed range-bound yesterday, but we are not out of the water at all. We advise investors to keep a close eye on political developments. The rift between President Andrzej Duda and the PiS leadership, triggered by the president's veto of two judicial reform bills, is set to widen.

This appears likely based on several anecdotal observations: first of all, PiS leader Jaroslaw Kaczynski did not simply take the veto lying down; he sent the speaker of the parliament, Marek Kuchcinski, to serve Duda an ultimatum to reverse his veto, which Duda declined; Kaczynski is unlikely to take this response kindly.

Following this, the PiS-controlled state media blocked Monday evening's presidential address to the nation, the Prime Minister gave her own address instead; private TV channels continued to show Duda's address. Such anecdotes suggest a rather precarious state of relations between the parliament and the president, which is not only likely to delay the implementation of legislation, it could erupt into a more major crisis.

"For example, if Kaczynski were to brazenly take on Duda by pressuring him to step down, that would further fuel the ongoing conflict between the EC and Poland, making article 7 inevitable. We see further upside for EUR/PLN in coming weeks," Commerzbank commented in its latest research report.

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