CEE FX: Inflation supports koruna over peers – ING

ING’s Frantisek Taborsky expects higher September inflation across Czech Republic and Hungary, with Czech data seen backing a November rate hike. He forecasts unchanged policy in Poland and Romania, maintains a bearish regional FX bias, and favours the Czech koruna, which he sees as less tied to global narratives and likely to outperform more dovish CEE currencies.

Regional inflation drives policy expectations

"Czech inflation is due tomorrow, and we expect it to rise from 1.9% to 2.5%, mainly on higher fuel prices. This would exceed the Czech National Bank's August forecast of 2.2% for the first time in a while. Core inflation should also edge up from 3.0% to 3.1%, supporting our call for a November rate hike."

"On Wednesday, Hungarian inflation is expected to climb from 1.3% to 2.0%, again largely due to fuel prices and above the National Bank of Hungary’s September forecast of 1.7%. The National Bank of Poland should keep rates unchanged at 3.75%, with Thursday’s press conference likely to remain cautious."

"However, we believe new government fuel measures will delay any rate hike until the first quarter of 2027. The National Bank of Romania should also hold rates at 6.50% on Thursday, with markets focused on comments about last week’s EUR/RON moves."

"As we noted on Friday, we favour the Czech koruna within the region; it hit new lows last week, but higher inflation this week should trigger a more hawkish stance from the CNB and shift market pricing. Moreover, the koruna is less tied to the global narrative and should outperform its CEE peers."

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