Local data weighs on zloty ahead of impulses from U.S.

The Polish zloty slipped on Wednesday as disappointing data from Poland's real economy weighed ahead of key global impulses from the United States while other Central European currencies held steady.

Thursday and Friday will see the release of the U.S. first quarter economic output data and the Fed's targetted consumer inflation measure respectively, with analysts saying that if price growth continues to strengthen, the dollar would remain in favour.

A firming dollar, seen as a safe-haven, often signals caution among investors towards riskier assets, such as emerging market currencies.

Poland data released this week showed significant downside surprise in March industrial output, stoking concerns about the scale of the country's expected economic rebound in 2024. Retail sales, seen as a key factor for this rebound, grew below expectations.

"In our opinion, the EUR/PLN rate will remain above 4.30 until the end of the week. Disappointing domestic data is weakening short-term prospects for PLN," ING Bank Slaski analysts wrote.

They said a slight decline for the eurodollar going into next week was "quite likely", and would drag down the zloty.

"We see a chance of (the zloty) going below 4.30 rather in May."

By 0935 GMT the Polish zloty EURPLN traded down 0.3% against the euro to 4.32. It had hit a more than four-year high in early April thanks to incoming European Union funds and steady interest rates, but slipped due to Middle East tensions and developments on how Poland plans to ingest the funds.

In Hungary, the forint EURHUF eased a touch to 393.70 per euro, after the central bank slowed policy easing, as expected.

"This week, Thursday's U.S. Q1 GDP preliminary data, as well as Friday's US PCE inflation data and S&P Global Ratings' debt rating update for Hungary, will indirectly move the forint," MBH Bank said in a note.

"The MNB (National Bank of Hungary) cut the base rate by 50 basis points yesterday, in line with analyst consensus, and the decision did not trigger a significant reaction in the euro/forint exchange rate."

Elsewhere the Czech crown EURCZK was flat against the euro at 25.245. The currency has been stuck in a range off of a two-year low hit in mid-February.

Czech central bank governor Ales Michl said on Tuesday the bank could cut rates further next week but would keep a cautious stance. Rate setters have made 125 basis points of cuts off the key rate in three steps since December, including moves of 50 basis points each in February and March.

Data on Wednesday showed Czech consumer confidence rising in April to its highest level since September 2021, while business confidence rose for a second straight month.