Political uncertainty in Poland is rising, with reports of possible vetoes affecting EU defence funding legislation. The government has indicated it may need an alternative “plan B” if a veto blocks the bill.
The opposition party Law and Justice (PiS) has chosen former education minister Przemyslaw Czarnek as its prime ministerial candidate for the autumn 2027 general election. The bank noted PiS did not select a more moderate figure from the party wing linked to former prime minister Mateusz Morawiecki.
Commerzbank forecasts the Polish zloty will lag behind its regional peers over the coming year due to domestic political risks. The article says it was produced with an AI tool and reviewed by an editor.
Growing political friction in Poland suggests the zloty will continue to lag behind other regional currencies. The selection of a hard-right candidate for the 2027 election by the opposition party signals a strategy of confrontation, not compromise. This deepens the political instability we have been monitoring for months.
This outlook holds even as the National Bank of Poland has kept interest rates elevated at 5.75% for over a year. While inflation has cooled from its 2025 peaks, it remains stubbornly above the central bank’s target, creating a difficult environment. The zloty’s failure to gain ground despite this high yield highlights how much political risk is weighing on the currency.
Considering these factors, shorting the zloty against its peers, like the Czech koruna, appears to be a sound strategy. We saw the zloty underperform the koruna through the final months of 2025, and this trend is likely to continue. This relative value trade isolates the specific political risk in Poland from broader regional sentiment.
The rising uncertainty also suggests an increase in currency volatility. Three-month implied volatility for the euro-zloty pair has already crept up from around 6% to nearly 8% since the start of the year. Buying zloty put options could be an effective way to position for a sharp move weaker in the coming weeks.
A key near-term catalyst to watch is the potential veto of EU funding legislation. We recall similar disputes over rule-of-law issues throughout 2025, and another blockage would almost certainly trigger a negative reaction in the currency. This makes holding bearish positions particularly relevant right now.
The political maneuvering ahead of the 2027 election is not a short-term issue and will create a persistent headwind for the currency. Any periods of zloty strength in the coming weeks should be viewed as opportunities to sell. The long-term political picture appears to be deteriorating, not improving.
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