EURPLN cross – Definition and Characteristics

Visegrad Four club

The Czech Crown, Hungarian Forint, and the Polish Zloty are the currencies of the so-called "Visegrad Four," with the fourth country in this club being the Slovak Republic. However, Slovakia has already adopted the Euro. 
Similarly to the Czech Republic, Poland is not rushing to adopt the Euro, and we might not see this happen in the near future. 

The quotation of the cross says to traders how many Polish Zlotys are needed to buy one Euro.

Thus, the value of the EURPLN cross is quoted as 1 Euro per X Polish Zlotys. Meaning, if the cross is trading at 4.50, it requires 4.5 Polish Zlotys to buy one Euro. If the EURPLN cross rises to 5.00, it means that the Euro has strengthened (the Zloty has weakened), and it now takes 5 PLN to buy one Euro. Alternatively, if the EURPLN cross drops to 4.20, it means that the Euro has weakened (and the PLN has strengthened), and it now takes 4.20 Zlotys to buy one Euro.

What drives the EURPLN cross?

Along with the Czech crown and the Hungarian forint, the Polish Zloty is considered a risky currency on the European continent. It comes from the fact that Visegrad countries are dependent on other more prosperous countries in the EU (such as Germany, France, etc.). If the EU slides into a recession, the Visegrad countries usually experience a more profound economic contraction. Alternatively, if the EU experiences growth in economic activity, the V4 countries tend to outperform.

To summarize, the V4 currencies tend to strengthen and outperform the Euro during the good times, while the bad times usually lead to a sell-off in these currencies.

Moreover, the divergence between monetary policies usually plays a role in currency movements as well. Poland used to have the benchmark interest rate at 1.5%, which was way higher than zero-to-negative rates in the eurozone. However, after the coronavirus crisis, Poland slashed its interest rate to 0.5%, making the Polish Zloty less attractive to investors.
The EURPLN cross rose from 4.30 to 4.60 in a matter of days, which was a 7% depreciation of the Polish Zloty.