Stronger zloty - potential driver for Poland's property market

We see a rather sharp return og the polish currency. If we see the bottom of the cycle both in the intrestrate, and the slowdown in the economy, we may have a pln vs Euro at 3,8 - 4.0 by the end of the year, and even as far down as 3,6 by next summer!

If my guessing is good, we could look at a 15% return of capital by investing in Poland just from currency fluctations!

My advice, borrow in pound, dollar or even frenc, and go long in pln!

GL

You are advising people to borrow money to bet on currency rates!!! Very clever if it goes against you....

Advice like that caused the global financial crisis

Any source/evidence? Right now there are plenty willing to go in at 4.2 EurPln expecting 4.8 long term. If you want to go that way wait 'til it breaks below 4.2 for at least a couple of weeks. It's only been on a downtrend for the past 2 weeks because of Bernanke. USD is expected to get stronger against near everything once tapering starts.

No I dont. The tread is started under real estate. I know many people that are looking to buy apartment in Poland would like to borrow in there own currency (maybe easier, have there income there, or get a better rate). If they consider going into the market, my five sent tells me that the risk attached to currency (weaker zloty towards spes euro) is smaler now then it nearly ever have been.


Evidence: Hehe, I hope you are joking and are not so stupid as it may seem!

I base my prediction on the following 3 facts:
- Growth in GDP has been and will continue to be stronger in Poland comared to the EURO area as a whole.
- The current account defecit is smaler in Poland then in the euro area as a whole.
- The polish intrestrate have been, and will continue to be higher then the euro rate.

Thats the long term facts, that I dont think its possible to not agree about, then comes the two factors that may be negotiable.
- The trust in the european markets is coming back. (Both in Poland but for sure in the euro area)
- The recession is over, soon over, and we will see economic growth in Europe again.

My prediction is based on that the to latter points will help the pln to get stronger towards currency like the euro and also french and dollars!

WOOOOOOO, I love gambling!

I wouldn't gamble on the Zloty for one simple reason - the exchange rate is (and has been for a while) based on nothing but the emotion of FX traders, nothing else. There's no logical reason for the Zloty to sit at 4.25 against the Euro - but as it is a minor currency, it is prone to wild swings for no apparent reason.

i know that i might be getting off the topic ,but wasn't it planned to poland to turn its currency to euro ?

It's not really a plan, just one of requirements of Poland's entrance to EU.

yeah i know ,but they didn't it do it yet ,and hopefully they'll keep Postponing it

But do you agree... when the risk in the eurozone goes down, the fundamental values would give us a stronger zloty (when the riskavers goes down).

So if you think that the "worst is over" we could face a 10-20% appreciation of the zloty towards Euro!

Or is the todaylevel the correct (based on the fundamentals)?

I think that's true assumption. Currently złoty is weak because of historically low interests rates in Poland and mentioned insecurity. In long term everything goes to mean, so low interests cannot stay low forever. But who knows how the situation in Europe will develop. Some say that after historically low interests in the world they'll have to go strongly up and then many countries may have problems financing debt. But if that's true, then we are really in the middle of crisis, not the end. who knows :)

I think the GBP used to be worth 6 or 7 PLN. Now, the GBP buys less than 5 PLN and in the past year or two it bought nearer 4 PLN.

Either the GBP is weak as a kitten, or the PLN is already strong.

If Poland is heading into a recession as I think some have suggested, why would the PLN strengthen? By comparison of deficits?

The GBP has been all over the place since the introduction of the Euro - it's not really a good guide. The DM/PLN rate and now the EUR/PLN rate is far more interesting - historically, it's sat around the 1:2 / 1:4 level.

I think most economists predict bigger growth, not recession in the future. Deficit is not so dramatic. Total debt needs at least 10 years to reach dangerous levels. level 60% will be moved away with OFE money which will buy a little bit of time for lowering deficit. And how it will continue depends on the situation in Europe.

And that's true that there is not much sense to look at ration GBP/PLN, because Polish trade with UK is not so big.

Lol. The Polish monetary easing cycle has not finished yet and should translate into the zloty's depreciation further, my opinion the USD/PLN will trade between 3.2 and 3.6 for the remainder of 2013. 2014 will be be anyone's guess and we have to see what mud PIS have to through at the handling of the economy. Exports and bonds are the concern of the NBP, not the strengthening of the PLN.

Quite a few commentators including one from the London School of Economics don't seem quite so cheerful about Poland's prospects.

blogs.lse.ac.uk/europpblog/2013/07/08/poland-recession/

articles.chicagotribune.com/2013-06-13/news/sns-rt-us-poland-rostowskibre95c062-20130612_1_finance-minister-jacek-rostowski-poland


Who is going to be right?

Weak zloty subdued interest rates.

There's an expected weakening of the Euro aginst the dollar today when Draghi speaks at 12:30 ET
ecb.int/press/tvservices/webcast/html/webcast_130801.en.html
In whichever direction it does go it will be a good trend trade lasting for a couple of weeks when combined with US employment stats on Friday.

Plenty of countries want the French and German investment touting the steady Eurozone. The Zloty get stronger the jobs/exports will go to the desperate countries - Spain and Bulgaria & Romainia very soon. A strong Zloty certainly doesn't stretch EU funding either. Anyone trading EUR/PLN for long term gains is a bit nutty as would anyone buying the zloty while the rate is still bouncing at 4.2 for long term and even then there are easier pairs to make money off without having to gamble.

If I was to take an 'risk' I'd be going for 4.33 by the end of this month even though rumour is of Euro weakening today. But I don't gamble or guess with exotics. The pair is used by hedge funds with a very few purist currency speculators due to a very small stats base/ lack of info.

I am sorry, but you are wrong. The goal for the NBP is the inflation. LIke all countries with a free float of the currency the intrestrate is getting set to have a stabil inflation. For Poland I thnk the accepted bands is from 1,5 to 3,5. For norway the goal is 2,5% and for the european centralbank the goal is to have a long term inflation around 2.0%

The centralbank has one tool (the intrestrate) and if you have been reading makro economy you will know that they can only "controll" one variable. In today regime that is Inflation, and inflation only!

Some want them to also care about bubles in the realestatemarket, employmentrate etc, but that is per definition impossible!

I can not understand why someone mean that Poland is going in to recession. Both the IMF and OECD has adjusted there prediction for GDB upwards both for 2013 and 2014. The same with the central bank of Poland. I belive more in these institutions compared to doomdays-troll at this forum (",

A stronger relativ current account balance to the euro-area means that relatively more people want/need pln comared to Euro. if it is minus or pluss in real number dos not matter. The currency "game" is a zero sum game, where evereything is relativ to each other and not what happens in real-terms!

No one has a crystal ball, I would much prefer to side with fact, than be involved in emotional desires.

Quote below:

Nevertheless, ratings agency Moody's expects Poland's GDP to grow 1.9 percent in 2013, HSBC expects it to grow by 1.6 percent and the Gdańsk Institute for Market Economics (IBnGR) expects 1.4 percent growth this year. On the lowest end, the European Commission expects it to grow by a mere 1.2 percent. As of press time, Poland's finance ministry was holding to its prediction of 2.2 percent growth.

Source: wbj.pl/blog/From_the_editor/post-407-poland8217s-economy-looks-to-exports-as-engine-of-growth.htm

As Poles stopped spending, businesses slowed, price risen. Inflation has dropped like a rock since June of last year, when it hit from 4.3 percent, to 1.3 percent in February - below the central bank's target of 1.5 percent to 3.5 percent. Core inflation (without food and energy prices) has slowed as well, from about 2.3 percent last summer to 1.1 percent in February.

Poles and Polish business are suffering fatigue, I believe things are going to get a touch worse before we see any form of improvement. I am not negative on PL I believe there is opportunity, we have just not hit the bottom yet, if PIS fires ahead in the poles next year just as they did previously in 2004, you will see a fire-sale of assets, you can't compare Poland to Norway or any other country, the dynamics are different.

The job for the centralbank is inflation, and nothing else. That has nothing to do with emotions. Some centralbanks within the same regime has more then one target, but that is per definition impossible (read a simple ISe - LM model from macroeconomy and you will see why)

Prediction about GDP in Poland. Ofcourse noone have the right answer here. The definition for a recesion is to have six month (or 2Qs) in a row with a shrinking GDP.

I can not belive Poland is going there in this round!

Compare countries - I know, but basic economic models work the same (maybe in different speed). But if you lower the intrestrate, the investment goes up, the GDP will follow and the inflation as well. Inflation is now below the target, intrestrate is lowered. When the GDP growth will catch up, the inflation will follow and so will the intrestrate!

Currencyrate: I think we will be looking at pricing conected to fundamentalvalues of the currency compared to the last 4-5 year when valuation of risk has been the most important component!

D

N, all I can say is I don't get bogged down in fundamentals I bought USD at 3.178 and will sell at 3.25/3.26. This will be the 7th time I have traded USD/PLN this year each time making between 2.5 and 6%. My broker at the bank with long term charts does not see the USD/PLN going below 3.15 this year, I don't know where you get your figures from bud.

If you can close in parts, 3.28 is on the cards (from end of March's print)

This is not the reason for this tread. Noone can realy predict the short-term fluctations, but why I started this tread was because:
- Many people from abroad that are moving to Poland would like to buy a apartment.
- They can not, or dont want to have a mortage in polish zloty, and get it in there own currency instead.

When you buy a apartment I guess the average timespan for your investment is at least 3-5 years.

If the prices of apartments are standing still the next four years (adjusted for inflation), but the zloty appreciate 20% towards the euro (my best guess), the buyer of this apartment has made a ok profit if he sell his apartment (in zloty) and pay back his loan (in euro)

I think that the risk that many people from abroad has been facing the last 4-5 years, are now heavy reduced, and I think that if the EURO-area is getting more stable, we can see a stronger zloty.

So in other words: If you as a buyer was on 50/50 to buy a apartment in Poland, and get the mortage in euro, you should be 52/48 (to buy) right now. That gives us more buyers!!!

At least I hope so!

D


The quate is from 30.07. Euro/zloty was at 4.31.
Today, at 11.08 the rate is: 4,18.

Thats a appreciation of 3%. I think this is just the beginning. When the markets start to see that the euro-area is done with the worst (for now), the risk-price of keeping zloty will go down, and the pricing of zloty will be connected to fundamentals variables in the economy. My best guess is that we will see the zloty under 4,0 against the euro before the calendar is saying November.

Since I have my mortage noted in Euro, I will be looking at a (paper)return of nearly 150.000pln just from looking at that the recovery goes faster in Spain, Berglusconi is kept away from any official office in Italy, the Greeks start to work again and that the Irish get there hands dirty again!

Nice life to sit at a outdoor serving in lovely Krakow, and drink my beer and think about this!

P.S. Any takers on a bet. Today rate is 4.18, I can go even money at 4.10... at lets say 1.desember! (100 days)

You can bet with the bank or online but a better date for you to pick that would be 31 december given that rostowski will be frantically selling euro on that date.

Im a bit doubtful myself, its only been under 4.10 once in the last 18 months or so from memory

That's a very loaded bet there Norwe, the chances of the Euro/PLN hitting 4.10 during the next 100 days is quite high. Anyway if anyone wants to take your bet here is a link for real time quotes:

oanda.com/currency/live-exchange-rates/#USD

What.

Even money should be 4.18 - Market is always right you know. If you think its unfair return you should go long in zloty!

Interesting numbers from GUS yesterday. For the currency not very important in the short run, but it make the fundamentals even stronger towards a stronger pln:

wbj.pl/article-63495-current-account-surprises-with-an other-surplus.html

Do you follow the news?


real-agenda.com/2013/08/13/polish-economic-miracle-fading-down/


Poland's manufacturing output was flat in the last two quarters, reflecting a dramatic retrenchment from prevailing optimism and high expectations; we're witnessing a switch from domestically driven demand to foreign-driven demand as the sole source of growth. Consumption spending will not recover much as unemployment creeps up and wages stagnate for the rest of 2013 in to 2014.

In my humble opinion, this is long overdue. I know of several companies that produce very very good products and export to the local markets as well as domestically - Lithuania, Czech Republic and Slovakia. Their products are decent, they just haven't wanted to try and enter new markets - so if domestic demand slumps, they may finally bite the bullet and go to where the real riches are to be found.

My feeling is we are in the hands of the Fed and their decision to taper, if they don't their will be currency turmoil if they do the markets will get crushed either way its gonna be a rocky ride from now to middle of 2014.

Tusk has started his moves: reuters.com/article/2013/08/16/poland-minister-idUSL6N0GH1XY20130816