Poland's Monetary Crossroads: Navigating EUR/PLN Amid Rate Cut Signals and Economic Uncertainty

The National Bank of Poland (NBP) finds itself at a critical juncture in 2025, balancing cautious monetary policy with the need to sustain economic growth. Recent signals from the central bank and technical trends in the EUR/PLN currency pair suggest a landscape ripe with opportunities—and risks—for forex investors.

Central Bank Caution: Navigating Inflation and Growth

The NBP's June 2025 decision to hold interest rates steady, despite expectations of future cuts, underscores its delicate balancing act. Policymakers cited slowing core inflation—driven by a 10% reduction in natural gas tariffs—and a projected inflation drop to near the 2.5% target by July. However, the absence of explicit acknowledgment of this tariff cut in the policy statement hints at lingering uncertainties.

Governor Adam Glapiński's emphasis on “assessing the outlook” reflects the NBP's preference for gradualism. This caution contrasts with Deputy Governor Kotecki's earlier calls for May rate cuts, which materialized in a 50-basis-point reduction—the first since October 2023. While further easing is anticipated, the NBP remains wary of fiscal loosening risks, particularly as Poland's government pushes infrastructure and defense spending.

Sub-3% GDP Growth: A Thorn in the Side of Recovery

Poland's economic resilience is under scrutiny. The NBP projects a “gradual recovery,” but sub-3% GDP growth looms as a key vulnerability. Global headwinds—including U.S. trade tensions and a weaker eurozone—threaten export-dependent sectors. Domestically, slower wage growth and lower import costs (due to a stronger euro) offer some relief, but these gains are fragile.

Investors should monitor inflation closely: if core prices unexpectedly rise, the NBP may delay cuts, strengthening the PLN and pressuring EUR/PLN downward. Conversely, a sub-3% GDP print could force the NBP to prioritize growth over inflation, accelerating rate cuts and weakening the PLN.

Technical Indicators: EUR/PLN at a Crossroads

The EUR/PLN pair trades at a critical juncture. Technical analysis reveals:

• Resistance at 4.2900: A May high that triggered selling pressure, signaling a potential ceiling unless broken.
• Support near 4.2500: A key zone where buyers may step in if the pair slips further.

The ECB's June rate cut to 2.0% adds tailwinds for EUR appreciation, while U.S. dollar weakness—driven by soft employment data—further supports EUR/PLN. However, the ECB's caution on future hikes may limit upside momentum unless inflation surprises to the downside.

Investment Strategy: Positioning for Rate-Cut Volatility

The confluence of central bank signals and technical dynamics creates a compelling forex trade:

1. Long EUR/PLN Breakout Strategy:
2. Entry: Buy EUR/PLN if it closes above 4.2900, targeting 4.3500.
3. Stop-Loss: Below 4.2500 to mitigate risk.

4. Rationale: NBP's expected July rate cut (25 bps) and ECB dovishness should weaken the PLN and euro, respectively, favoring EUR appreciation against a weakening PLN.

5. Risk Management:

6. Monitor U.S. “Liberation Day” tariff developments, as trade tensions could spur USD rallies.
7. Track Poland's Q2 GDP data—if it slips below 3%, expect accelerated NBP easing and further EUR/PLN gains.

Final Thoughts

Poland's monetary policy outlook hinges on inflation staying subdued and growth avoiding a sub-3% slump. For forex traders, EUR/PLN presents a high-reward play, but success demands vigilance toward geopolitical risks and central bank communications. As the NBP edges closer to its inflation target, the path to rate cuts—and EUR/PLN appreciation—grows clearer.

Stay alert to the next NBP meeting in July; a confirmed cut could spark a breakout to test 4.3500, while a delay might retest support at 4.2000. In uncertain times, technicals and fundamentals align to offer a roadmap for disciplined traders.