CEE FX: Why Are a Dovish Stance and the Energy Shock Weighing on Currencies? – ING

Regional FX remains under pressure from higher energy prices and a stronger Dollar, with ING strategist Frantisek Taborsky retaining a dovish bias ahead of a packed week for Central and Eastern European (CEE) markets. The calendar includes PMI, inflation and industrial data from Turkey, Hungary and the Czech Republic, alongside policy decisions from Poland and the Czech National Bank. Taborsky expects NBP to hold rates at 3.75%, with hikes deferred until 2027, while he sees CNB as likely to raise rates by 25bp.

Can CEE Currencies Withstand a Stronger Dollar and Dovish Central Banks?

"Trading on Friday saw a return of risk-off sentiment, following a brief period of relief after the Fed and European Central Bank meetings. The combination of rising energy prices and a stronger dollar globally, alongside generally dovish central banks within the CEE region, will continue to exert pressure on local currencies."

"Tomorrow, we will see Turkey’s inflation figures for October. Our estimates suggest a monthly acceleration from 1.8% to 2.4%, while the year-on-year figure is expected to tick lower to 29.6%."

"On Wednesday, Hungary’s industrial production data and the Czech Republic’s October inflation figures will be published. We anticipate an acceleration in headline inflation from 2.5% to 2.6%, and a further rise in core inflation from 3.1% to 3.3%. The National Bank of Poland is also expected to keep rates unchanged at 3.75% and present a new forecast. We do not anticipate the first rate hike until the first quarter of 2027."

"On Thursday, the Czech National Bank will follow, likely raising rates by another 25bp to 4.00% while also presenting a new forecast."

"In line with our expectations, EUR/CZK has returned to the 24.300–350 range, which we consider fair for the time being. Although we anticipate a hawkish stance from the CNB, the bar is high given that 100bp of tightening is already priced in and the koruna has a tendency to weaken slightly following CNB meetings. We could see the pair move slightly above 24.350 again."

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