CEE FX: Geopolitics drives rates and currencies – ING

ING strategist Frantisek Taborsky highlights easing Romanian inflation driven mainly by base effects, with the National Bank of Romania unlikely to cut rates before early 2027. Across Central and Eastern Europe (CEE), hawkish pricing persists after a sharp rates sell-off linked to US–Iran tensions, yet higher yields should offer FX protection, supporting recovery in the Czech Koruna (CZK) and Zloty while the Hungarian Forint (HUF) stays pressured by energy concerns.

Higher yields support regional FX

"In Romania, July inflation released this morning showed the first signs of easing, with headline inflation falling from 10.4% to 8.2% YoY, the lowest level since mid-2025. However, the drop mainly reflects base effects, while month-on-month momentum shows no clear slowdown."

"We expect inflation to keep declining, but the National Bank of Romania is unlikely to cut rates before early 2027."

"Elsewhere in the region, today’s calendar is quiet, leaving core markets and geopolitics in focus. Rates sold off sharply at yesterday’s open, led by the Czech market, before signs of US-Iran negotiations brought some relief. Even so, pricing remains hawkish, with almost three rate hikes priced in for the Czech Republic and two for Poland."

"We expect some recovery in the koruna and zloty, which saw the sharpest rate moves yesterday, while the forint is likely to remain under pressure from local energy supply concerns."

"We think the market has moved too far in pricing tightening, but higher rates should offer some FX protection and support a return to more stable currencies, as seen at the start of the conflict."

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