Recent fluctuations involving the Polish zloty (PLN) have highlighted the increasing vulnerability of the currency against the backdrop of geopolitical tensions and economic forecasts for 2025. On February 28, 2025, the exchange rate for the US dollar reached 4.05 PLN, propelled by fears surrounding U.S. political dynamics and the standoff between U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskyy, which has sent the currency markets reeling.
According to reports, the dollar strengthened against the zloty with a 12 grosz increase (one grosz is one hundredth of a zloty), marking the rise beyond the previously established barrier of 4.00 PLN. Meanwhile, the euro also witnessed significant gains, rising to around 4.19 PLN, indicative of adverse conditions faced by the zloty.
Market analysts pointed out the increased capital flight to safer assets, often referred to as the "risk-off" trade. Jack McIntyre, Portfolio Manager at Brandywine Global, noted, "Clearly increased uncertainty at many levels, and Friday's events only amplified it. It appeared we were heading toward some peace agreement concerning Ukraine, but now those hopes are stalled—the market must account for somewhat higher risk premiums."
Compounding this instability are fears surrounding potential new tariffs imposed by Trump on key trading partners, which could accelerate inflation and stunt economic growth. Rick Meckler from Cherry Lane Investments remarked, "Unconventional actions from Trump's administration contribute to unpredictability, causing nervousness across markets."
The increase of the dollar took place across three trading sessions, gaining 12 grosz and surpassing numerous key resistances, showing the market's reaction to geopolitical developments. Public conflicts between the U.S. and Ukraine have raised multiple eyebrows, with investors hastily seeking refuge in U.S. Treasury bonds and the dollar itself. The heightened geopolitical tensions often favor the dollar, especially against currencies from developing economies.
On the other hand, forecasts suggest the USD/PLN exchange may settle between 4.0 and 4.2 PLN over the upcoming quarters. Financial forecasters have differing predictions: Goldman Sachs estimates the dollar could reach as high as 4.89 PLN by the end of 2025, with such high rates expected only under significant geopolitical strains.
Specific to the euro, the exchange rate also showed signs of volatility, with the EUR/PLN rising above 4.19 PLN, which was regarded as reflective of broader market sentiments. Market instability was attributed directly to expectations of tariffs on European goods and the diplomatic fallout from the February 28 meeting between Trump and Zelenskyy, which ended abruptly amid tense exchanges.
For investors reevaluated risks associated with their capital following the turbulence from both political bodies, Maciej Przygórzewski, Chief Currency Dealer at InternetowyKantor.pl, observed, "Capitol is returning across the ocean," indicating how the situation could deter investment toward nearby markets like Poland.
Updates from local currency dealers indicate varying rates for purchasing euros across exchanges, emphasizing the dispersion and current market rates. On February 28, the National Bank of Poland (NBP) determined the EUR/PLN rate at 4.1575 PLN, which will stand until about March 3, 2025. This adjustment is indicative of overcoming prior losses earlier the same month.
The analyses from major financial institutions, including Morgan Stanley and HSBC, foresee the continued dependency of Poland's currency strength on the aforementioned factors, particularly the prevailing U.S. economic performance relative to local dynamics and any long-term geopolitical advancements surrounding the conflict within Ukraine.
While Goldman Sachs and others highlight potential weaknesses down the line due to decreasing inflation and shifting central bank policies within the European Union, the zloty has shown resilient growth since mid-2024. Potential future gains hinge on diplomatic progress and economic improvement across Europe.
Although most current analyses predict moderate fluctuations, the underlying sentiment remains one of cautious optimism as fresh expectations for the Polish economy surface against global tides. The recent rallies seen by the zloty underlines the significantly shifting markets influenced by the global political arena.