Commerzbank analyst Tatha Ghose says the split within Poland’s ruling coalition keeps domestic political risk elevated. This is described as a continuing factor weighing on the Polish zloty.
Prime Minister Donald Tusk gave assurances about government stability and referred to a “stable zloty”. The zloty has still lagged behind peer currencies and is described as an underperformer in its regional group.
The political situation is reported as becoming more complex, with renewed infighting in the coalition. Political risk is expected to remain in focus until Poland’s general elections in November 2027.
The article was produced with the help of an AI tool and reviewed by an editor. It was published by the FXStreet Insights Team.
We recall the warnings from 2025 regarding the fragility of Poland’s ruling coalition and its negative impact on the Zloty. Those exact political risks are re-emerging now, with recent public disagreements over judicial reforms creating renewed market uncertainty. This confirms the view that the underlying political tension was never resolved and will likely persist.
The Zloty’s weakness is evident in the data, with the EUR/PLN exchange rate recently drifting up to 4.42, underperforming regional peers over the last quarter. This currency drag is happening even as January’s inflation remained stubborn at 4.1%, limiting the National Bank of Poland’s room to maneuver. The market is clearly pricing in this combination of political and economic pressure.
For derivative traders, this means we should anticipate higher volatility in the coming weeks. Three-month implied volatility on EUR/PLN options has already climbed from below 7% to 8.5% as these tensions have resurfaced. We see value in buying options structures that profit from price swings, such as long straddles, to capitalize on this instability.
Looking ahead, the upcoming budget negotiations will serve as a major test for the government’s unity. Given the coalition’s internal conflicts, hedging long-PLN exposure with forward contracts seems like a prudent defensive strategy. Any failure to pass key fiscal measures could easily trigger a sharp move against the Zloty.
