CEE FX: Global headwinds pressure currencies – ING

ING’s EMEA FX & FI Strategist Frantisek Taborsky highlights that stronger regional hawkish repricing has not prevented rate differentials from narrowing or staying flat, leaving Central and Eastern European (CEE) currencies vulnerable as the Dollar rallies and global energy prices rebound. He maintains a bearish bias on regional FX, expecting further weakness, with the Polish Zloty likely to underperform given the central bank’s relatively dovish stance.

Bearish bias on regional currencies

"A new day brings a new direction for the markets. Market sentiment shifted again yesterday, and we saw a strong hawkish repricing across the region; rates across the region and along the curve returned to previous highs."

"Despite higher regional rates, we observe that rate differentials are actually narrowing or remaining stable. This is currently insufficient to stabilise FX, while the US dollar continues to rally."

"Coupled with a rebound in global energy prices, this creates an overall negative environment for CEE currencies."

"We therefore maintain a bearish bias and anticipate further regional weakness, with the PLN likely to underperform in this environment given the central bank's dovish stance relative to its peers."

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