CEE FX: Relief supports regional currencies – ING

ING’s Frantisek Taborsky argues US midterm results, a softer Dollar and lower US Treasury yields reinforce recent relief in EM and CEE assets driven by US–Iran headlines and cheaper energy. He expects lower CEE rates and stable EUR/CZK around 24.300–24.350, while EUR/PLN may consolidate near 4.410–4.420 as priced-in hikes and a dovish NBP keep the zloty under pressure.

Midterms, energy and local central banks

"The US midterm election results point to a scenario that is already well-priced, with limited implications for the EM and CEE regions at this stage. A weaker US dollar and lower 10-year Treasury yields should further support the general sense of relief seen in recent days, driven by headlines regarding US-Iran negotiations and lower energy prices."

"While the future trajectory of the conflict remains unclear following the midterms, the market currently signals a continuation of this relief. This should help push CEE rates lower and ease pressure on regional currencies."

"We anticipate that the CNB will hike interest rates tomorrow and present a new forecast."

"Consequently, the EUR/CZK pair should remain within the 24.300–24.350 range."

"In Poland, the National Bank of Poland is expected to keep interest rates unchanged at 3.75% today and will present a new forecast. Greater attention should be paid to tomorrow’s press conference, which is expected to provide further forward guidance."

"While some political relief yesterday may have reduced pressure on the zloty, our overall outlook remains bearish due to the NBP’s dovish stance. Given that a significant portion of rate hikes – roughly 75bp – has already been priced in, the EUR/PLN pair could stabilise within the 4.410-4.420 range."

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