Poland's financial markets experienced a significant boost as investors anticipated a victory for pro-European Union parties in the general election. The WIG 20 equity index XX:WIG20 surged by 3.5% to reach a seven-week high in Warsaw. Simultaneously, the yield on Poland's 10-year government bond dropped by 15 basis points to 5.68%. The Polish zloty USDPLN, -0.94% also gained strength, rising by 1.3% against the U.S. dollar to 4.255 zloty.
Early results and exit polls indicated that Civic Platform secured 31% of the votes, while the incumbent Law & Justice Party received 36.6%. However, in coalition with its partners, Civic Platform is on track to secure a majority of 248 out of 460 seats in the Sejm, Poland's lower house of parliament. If these early indications are confirmed by the final results on Tuesday, it would mark the end of the Law & Justice Party's nine-year tenure—a period characterized by its populist and ultra-conservative ideology, often at odds with the European Union.
In contrast, Civic Platform is led by Donald Tusk, a former European Council President. Tusk's possible victory reflects the desire of many Poles for a more cooperative relationship with the EU. Such a reset could potentially provide access to the tens of billions of euros that had previously been withheld by the EU due to concerns over the Law & Justice Party's disregard for rule-of-law standards.
The zloty has outperformed other emerging-market currencies in Europe over the past month, particularly against the euro. Experts attribute this positive trend to polls indicating a potential defeat for the Law & Justice Party, as well as traders positioning themselves for a potentially more hawkish stance from the central bank.
Goldman Sachs economist, Kevin Daly, anticipates that under a Civic Platform-led government, there may be a more hawkish approach from the central bank. This expectation is based on Governor Adam Glapinski's previous voting patterns, which have tended to be more hawkish in such circumstances.
In conclusion, the outcome of Poland's general election has generated optimism in both the financial markets and among those looking for a recalibration of Poland's relationship with the European Union. The anticipated victory of pro-European Union parties has resulted in a rally in stocks, bonds, and the zloty, indicating a favorable outlook for Poland's future trajectory.
