UBS revised its quarter-end forecasts for the US dollar against the Polish zloty (USDPLN), citing a range of factors including the potential challenges Europe and Poland may face from Donald Trump’s possible second presidency, robust US economic data, and lackluster European figures.
The new projections see an increase to 4.35 for the first quarter of 2025, up from 4.14, and subsequent quarters show similar upward adjustments.
The Swiss financial services company anticipates that the US addressing its high fiscal deficits and a diminishing of Europe’s negative factors could eventually lead to a reversal of the recent USD gains. UBS also noted the strong performance of the US dollar following Trump’s election, driven by growth-supportive aspects of his agenda, potential inflationary impacts, and continuous strong US economic data.
The US administration’s trade policies could initially add to the appeal of the US dollar as well. However, UBS expects that market focus will eventually shift to aspects of Trump’s agenda that could negatively affect the US dollar, such as high fiscal deficits and the repercussions of tariffs on US growth. Poland, while having limited direct trade exposure to the US, is integrated into the broader European economy and could be affected by a reduction in US support and a potential decrease in commitment to NATO.
In terms of economic outlook, UBS forecasts Poland’s real GDP growth to be around 3% year-on-year in 2024, with an expected acceleration to 3.5% in 2025 due to significant EU funds. The fiscal deficit is projected to remain wide, with risks of slippage during an election year. Poland’s monetary policy has maintained the policy rate at 5.75% in January, with the National Bank of Poland (NBP) signaling potential inflation persistence due to energy prices.
Looking ahead to the Polish presidential election, the first round is scheduled for May 18. The outcome could influence the zloty, with a victory by Civic Platform’s candidate Rafal Trzaskowski expected to facilitate the passage of key legislation, potentially bolstering the currency. Conversely, a win by Law and Justice backed candidate Karol Nawrocki could lead to legislative gridlock, potentially dampening sentiment.
UBS also cautions that continued US economic strength and inflation not aligning with targets may lead the Federal Reserve to reassess its rate-cutting trajectory, which could support the dollar for an extended period.
Additionally, aggressive trade tariffs by the US may initially benefit the greenback, possibly pushing USDPLN above the 4.40 level. Conversely, effective absorption of EU funds or an on-market exchange of these funds amid moderating US activity could support the zloty.
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