Zloty Stabilizes as Dollar Momentum Cools

The key backdrop is that the US dollar has recently firmed to a one-week high on safe-haven demand, a move that has kept most regional currencies on the defensive. Even so, the latest tone in the market suggests investors are no longer adding aggressively to zloty shorts, which can happen when positioning gets stretched or when broader risk appetite stops deteriorating. The euro’s own recovery has also helped prevent a sharper PLN slide, while the dollar’s advance has been more restrained than in outright risk-off episodes.

Adalytica’s trade signals point to a mixed but not outright bearish setup for major currencies. The US dollar’s sentiment reading is neutral at 35, with awareness also neutral at 56, while the euro’s sentiment has improved to 65 even though its awareness gauge sits at extreme fear. That combination fits a market that is still cautious, but not in panic mode — conditions that often produce consolidation rather than decisive FX moves. For the zloty, that means Monday may be more about range trading than a fresh trend in either direction.

For investors, the immediate question is whether this is a pause before another leg weaker or the start of a base. A stable zloty tends to support local-currency assets by reducing imported inflation and limiting pressure on the central bank’s policy calculus, but that benefit only becomes durable if global dollar strength fades and regional risk sentiment improves. If the dollar resumes its climb, the zloty could quickly come back under pressure; if it stalls, PLN may have room to recover some of the ground lost in recent weeks.

The market’s next test will come from whether policy support, risk sentiment and external flows can overpower the still-firm dollar backdrop. Until then, the zloty’s best reading is not strength but restraint: the sell-off has stopped, and for now that is the main story.