The EEMEA FX Strategist: Rising US rates are a risk to EEMEA FX outlook

Research evidence excerpt

The EEMEA FX Strategist: Rising US rates are a risk to EEMEA FX outlook

Poland: lower EURPLN from here

Mai Doan Mikhail Liluashvili

MLI (UK) MLI (UK)

mai.doan@bofa.com mikhail.liluashvili@bofa.com

View: weaker broader USD to drive the zloty stronger

A weaker dollar should drive EURPLN below forwards. The zloty looks overvalued, which

constrains PLN appreciation against the EUR. A hawkish stance from the NBP should

also help.

Key macro developments: The energy shock relating to the Iran war should be less

disruptive to Poland/CEE than in 2022, but it is starting to change the macro outlook.

We no longer see rate cuts prospects from 3.75% currently, and recently revised down

2026 GDP growth forecast to 3% from just under 4% previously.

High real rates and a lower inflation starting point generally allow the central bank to

wait and see instead of reacting pre‑emptively, so the bar to hike is high. Policy makers

watch second round effects, rather than headlines, are the main risk. But within CEE, we

see Poland as more sensitive to CPI overshooting risks – partly driven by higher gas

exposure in the CPI basket and expired energy price cap schemes, more fiscal

vulnerability, and a relatively less dovish central bank vs CEE peers.

GDP growth is well cushioned by EU funds inflow, and still set to strongly outperform

EU/CEE peers. EU funds absorption is set to accelerate (around 2.8% of GDP this year),

helping offset weaker private consumption as households save more amid high rates and

geopolitical uncertainty.

External sensitivity is manageable, and unlikely to trigger BoP stress. Every $10/bbl rise

in oil worsens the energy trade balance by around 0.15% of GDP; every €10/MWh in TTF

gas adds around 0.2% of GDP to import bill.

Fiscal is Poland’s key vulnerability.