Polish Cabinet Reshuffle, Opportunity to Add to Long Zloty

News that the Polish Prime Minister Tusk is using the alleged corruption scandal to re-jig his cabinet to attempt to rebuild support for his ruling Civic Platform Party has weighed on the zloty as a wave of profit-taking on its strong three day advance is seen. Public support for the Civic Party has declined according to polls since the the scandal story broke last week. An election will be held next year and the departure of the Deputy Prime Minister Schetyna is noteworthy as he was seen as a likely successor to Tusk. He is now tipped to head the party in parliament and replace the sports minister who resigned previously (Oct 5) and headed the Civic Party's parliamentary club. Finance Minister Rostowski has retained his portfolio but his deputy Szejnfeld did not.

PM Tusk is expected to deliver a speech to parliament tomorrow addressing the scandal. Contacts suggest that the wire taps show Schetyna was unwilling to help or even hear out the lobbyists and that his shift should be understood as an attempt to strengthen the Civic Platform Party in parliament and is not a demotion.

Our bullish case for the zloty is based on its relative strong fundamentals in the region and its pullback in the second half of September provided a new and better buying opportunity. Similarly, the pullback today is providing an opportunity to add to long zloty positions as the underlying fundamental assessment has not changed.