Pole Dancing - it's fine till you fall off!!!

It seems that the powers that be in Warsaw have reverted to type of late, and are jawboning the euro / zloty rate. Skrzypek (CB chief)'s comment that "The current FX market situation isn't justified by the fundamentals" isn't hugely helpful against a backdrop of their starting to talk openly about European integration again.

H2 2008 / H1 2009 seemed (to me) to be to be mired by constant changes in their stance on timing of any move towards their eventual nestling in the bosom of monetary union. Sometimes seemingly on a daily basis the target / projected date would move by a factor of years until the market basically gave a huge collective yawn every time they (he) were quoted on the wires. Then all went blissfully silent as realisation dawned that at this stage in the proceedings, with the markets the way they were, you could stick your finger in the air as many times as you liked and the results still wouldn't be meaningful.

In the meantime, EUR/PLN currently sits pretty much bang on the 61.8% retracement of the move up to the 4.93 highs last year that saw all the corporates, playing the convergence 'punt' that had bought hefty downside options structures squealing 'foul foul' and calling for the banks to be stuck with the positions, a move that PM Tusk eventually (although not immediately it has to be said) rejected, and quite rightly so.

So where exactly is the problem with the rate? The move hasn't been at all excessive in it's velocity, there is doveish noise coming out of the rates world that should certainly slow things for now, and the exchange rate is still only sitting at levels that we saw in 2006.

Be mindful what you wish for I say.