Zloty strengthens and stocks rise as markets welcome exit polls suggesting change in power

Poland’s stock market recorded its strongest post-election opening and the zloty strengthened as markets responded to exit polls published last night and this morning suggesting the opposition will be able to form a new government.

Final results are not expected until later today or tomorrow, but the exit polls estimate that an opposition coalition will hold a majority of 248 seats in the 460-seat parliament. The current ruling Law and Justice (PiS) party is well short of a majority, with an estimated 198 seats.

The #exitpoll from Poland’s elections indicates that, although the ruling party came first, it has lost its parliamentary majority and that an opposition coalition could form a government.

See our full report by clicking here ⬇️ https://t.co/zxk5axl6No

— Notes from Poland 🇵🇱 (@notesfrompoland) October 15, 2023

The poll results boosted optimism on the markets. The Warsaw Stock Exchange (GPW) rose by more than 2.2% at its opening, the best figure after an election since the GWP was reestablished in 1991 following the fall of communism. By around 2 p.m. on Monday, the gains had reached nearly 4%.

Its blue-chip index, the WIG20, gained even more, rising by 5.2% by 2 p.m. The banks’ sub-index rose strongly, by almost 9%, with partly state-owned bank Pekao leading the rise, surging by almost 11%. State energy giant Orlen rose by 8%.

Dziś najbardziej wzrostowe powyborcze otwarcie sesji na GPW w historii! pic.twitter.com/EEL9ar5wEf

— Tomasz Hońdo, CFA (@TomaszHondo) October 16, 2023

The exit poll results also boosted the zloty, which strengthened below 4.5 zloty per euro for the first time since early September. It was 1.2% stronger on Monday morning than on Friday afternoon.

The zloty started to weaken strongly around 6 September, when the central bank surprised the markets with a rate cut three times larger than expected.

Analysts at three banks, Santander, mBank and Millennium, attributed today’s shift to the prospect of better relations with the EU under an opposition government, including the likelihood of unblocking funds currently frozen over rule-of-law concerns.

Late polls showing a possible change in power in Poland strengthen the zloty against major currencies – euro, dollar, swiss franc and pound. pic.twitter.com/5iwqbTRam6

— Alicja Ptak (@AlicjaPtak4) October 16, 2023

“The euro exchange rate is rising in anticipation of improved relations with the EU, an increase in the likelihood of EU funding inflows, an improvement in the country’s institutional strength, less chance of further pronounced interest rate cuts,” said analysts at Santander.

“If the actual results of the vote do not fundamentally change the conclusions, the zloty may remain at current levels in the coming days,” they added.

“At the moment, the [EU’s post-pandemic] recovery funds and cohesion funds are much more likely to be unlocked quickly,” wrote analysts at mBank, adding that “this is more of a feeling than something that can be linked to hard data”.

Opposition leader @donaldtusk has pledged that, if he wins power at October’s elections, he will unblock Poland’s frozen EU funds the very next day.

Ruling party figures say that proves the EU is using the rule of law as a pretext to change the government https://t.co/Vsvtc7PPtA

— Notes from Poland 🇵🇱 (@notesfrompoland) August 28, 2023

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