CEE FX: Zloty faces further downside amid dovish NBP outlook – ING

ING strategist Frantisek Taborsky highlights resilient CEE economies, with Czech and Hungarian PMIs showing strength, while Poland improves and Romania weakens. However, he sees the Polish Zloty as the region’s weakest currency, as EUR/PLN tests new highs amid political uncertainty and unfavourable global conditions. A dovish NBP outlook and fiscal concerns reinforce expectations of further Zloty weakness, with EUR/PLN seen above 4.420.

Bearish Zloty outlook and EUR/PLN target

"Yesterday’s PMI readings in the region confirmed the economy's strong position across the board. The outlook remains positive. With the exception of Turkey, all countries show PMI levels higher than those seen before the onset of the US-Iran conflict."

"The Czech Republic and Hungary appear particularly strong, hovering near or reaching new highs; Poland is edging higher, while Romania has declined once again. Overall, however, the economy continues to show resilience, pointing to a stable outlook for the coming months."

"EUR/PLN tested new highs yesterday following political headlines over the weekend. In our view, these developments provide further bearish momentum, suggesting additional downside for the zloty."

"Additionally, we anticipate a dovish tone from the National Bank of Poland at this week’s meeting. Taken together, we continue to view the zloty as the weakest link in the CEE region and expect the EUR/PLN pair to settle above 4.420."

"Naturally, global conditions remain unfavourable, characterised by a strong US dollar and high energy prices, despite some improvement yesterday. Furthermore, Poland’s public finance deficit, the highest in the EU, leaves the country exposed to potential turmoil in the euro-denominated bond market."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)