Commerzbank analyst Tatha Ghose says the split inside Poland’s ruling coalition keeps domestic political risk high. This ongoing risk continues to weigh on the Polish zloty.
Prime Minister Donald Tusk has said the government is stable and pointed to a “stable zloty.” Even so, the zloty has lagged behind peer currencies and is seen as an underperformer in its region.
Reports say the political picture is getting more complicated, with new infighting in the coalition. Political risk is likely to stay in focus until Poland’s general election 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 remember the warnings from 2025 about how fragile Poland’s ruling coalition was, and how that could hurt the zloty. Those same risks are showing up again. Recent public disputes over judicial reforms have brought back market uncertainty. This supports the view that the core political tension was never solved and is likely to continue.
The zloty’s weakness is clear in the data. EUR/PLN has recently drifted up to 4.42, and the currency has underperformed regional peers over the last quarter. This drag is happening even though January inflation stayed high at 4.1%, which limits the National Bank of Poland’s ability to act. Markets appear to be pricing in both political and economic pressure.
For derivatives traders, this suggests we should expect higher volatility in the coming weeks. Three-month implied volatility on EUR/PLN options has already risen from under 7% to 8.5% as tensions returned. Options strategies that benefit from bigger price moves, such as long straddles, may offer value in this environment.
Looking ahead, the next budget talks will be a key test of coalition unity. With internal disputes still active, it may be wise to hedge long-PLN exposure using forward contracts. If the government fails to pass major fiscal measures, the zloty could weaken sharply.
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