CEE FX: Rates relief and CNB meeting – ING

ING strategist Frantisek Taborsky says Central and Eastern European markets opened positively, with rates markets outpricing hikes while FX stayed sidelined. Pricing implies around two Czech National Bank (CNB) hikes, a little more than one in Poland and three cuts in Hungary, but Taborsky expects unchanged rates in Czech Republic and Poland and more cuts in Hungary. He sees scope for further rates rally if global conditions stay supportive.

Zloty and forint seen outperforming

"Markets opened on a positive note, as expected, following weekend headlines from the Middle East, with rates markets outpricing rate hikes. FX, however, remained sidelined at the start of the week, with limited movement."

"Market pricing now implies around two CNB hikes over the next 18 months, a little more than one hike in Poland and around three rate cuts in Hungary. We continue to expect rates to remain unchanged in the Czech Republic and Poland, while the Hungarian central bank is likely to deliver more cuts than currently priced in."

"Rates, therefore, have more scope to rally if the global backdrop remains supportive. In the Czech Republic and Hungary in particular, inflation prints and this week’s CNB meeting should provide additional support."

"Yesterday’s moves largely tracked core markets, with little change in rate differentials. Our views from yesterday are unchanged: a stronger zloty and forint should benefit from global relief, while the koruna is likely to underperform on a dovish interpretation of this week’s CNB meeting."

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