• The Polish zloty depreciates to the 4.5700 region.
• The NBP reduced the policy rate by 75 bps to 6.00%.

EUR/PLN rose to levels last seen in early May around the 4.5700 zone in response to the unexpected interest rate cut by the National Bank of Poland (NBP).

EUR/PLN now targets the 200-day SMA around 4.5900

EUR/PLN rapidly added to the weekly move higher after the NBP caught everybody off guard and reduced its policy rate by 75 bps to 6.00% at its monetary policy meeting on Wednesday.

The sudden move by the Polish central bank was the first rate cut since it raised rates to 6.75% (from 6.50%) exactly a year ago.

The NBP's decision to trim rates comes in a context of declining inflation, albeit still elevated by domestic standards. Furthermore, tracked by the CPI, consumer prices rose at an annualized 10.1% in August, retreating for the seventh month in a row after hitting highs past 18% in February.

EUR/PLN levels to consider

So far, spot is up 1.63% at 4.5671 and a breakout of 4.5900 (200-day SMA) would open the door to 4.6158 (monthly high May 1) and then 4.7233 (monthly high March 20). On the other hand, the next support emerges at 4.4545 (55-day SMA) seconded by 4.3985 (2023 low July 31) and finally 4.3753 (monthly low August 18 2020).