CEE FX: Dovish signals challenge gains – ING

FXStreet Insights Team FXStreet

ING’s Frantisek Taborsky notes weaker US data and a softer Dollar helped Central and Eastern European (CEE) currencies, but focus now shifts to local inflation and central banks. He expects slightly softer-than-forecast inflation in Hungary and the Czech Republic, a dovish National Bank of Poland (NBP), and warns that lower inflation and dovish tones could pressure CEE FX near term, while keeping a medium-term bullish view on Czech Koruna (CZK) and Hungarian Forint (HUF) and bearish on Polish Zloty (PLN).

Local inflation and dovish central banks

"Weaker US labour data and a softer dollar gave CEE currencies some breathing room last week, shifting this week’s focus back to local drivers. June inflation figures for Hungary and the Czech Republic are due tomorrow. After the downside surprise in Polish inflation last week and the sharp fall in fuel prices, markets are positioned for soft prints."

"In Hungary, we expect headline inflation to edge up from 1.8% to 1.9%, below the National Bank of Hungary’s 2.0% forecast. In the Czech Republic, inflation should fall further from 2.1% to 1.9%, below the Czech National Bank’s 2.1% projection. Both readings should send a dovish signal to markets."

"A similar message is likely from the National Bank of Poland, which is expected to leave rates unchanged at 3.75% on Wednesday and publish a new forecast. While the projection should show higher inflation than in March, when the impact of the US-Iran conflict was not included, the press conference is likely to sound dovish after two consecutive downside inflation surprises."

"A softer dollar supported a rally in CEE FX last week, and positive sentiment should carry into this week. However, lower inflation prints in Hungary and the Czech Republic, together with a dovish tone in Poland, could weigh on local FX."

"In the short term, CEE FX may face some pressure, but the medium-term bias remains unchanged: bullish CZK and HUF, bearish PLN."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD eases from tops, retests 1.3630

GBP/USD clings to its daily gains, although it gives away some gains and recedes toward the 1.3630 region on Thursday. Cable’s uptick comes despite the bounce in the Greenback, which manages to regain some balance in the wake of Wednesday’s deep pullback.

EUR/USD turns negative near 1.1670

EUR/USD now trades with modest losses around 1.1670, coming all the way down from earlier tops beyond 1.1700 the figure. The pair’s decline follows the acceptable rebound in the US Dollar as market participants continue to closely follow developments from the US money market.

Gold comes under pressure below $4,500

Gold faces some correction and slips back below the key $4,500 mark per troy ounce on Thursday. The precious metal’s daily decline comes amid the slightly improvement in the US Dollar and rising US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP extend gains as ETFs inflows and improved sentiment boost outlook

Cryptocurrency prices are extending gains on Thursday, led by Bitcoin’s (BTC) climb above $70,000. Ethereum (ETH) remains bullish, trading above $2,200, while Ripple (XRP) has recovered above $1.15 as bulls tighten their grip.

US Treasury doubles long-dated bond buybacks: Why are yields rising again?

US Treasury yields stabilize on Thursday after Wednesday’s sharp decline, with the 10-year yield edging back up to 4.672%. The US Treasury doubled the size of some long-dated debt buybacks, a surprise decision that helped ease the recent surge in yields.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.