CEE: Local rates have no chance to find a firm footing – ING
Our CEE region currency preference yesterday held up in the current messy conditions, and we want to keep it that way, being bullish on CZK, neutral on HUF and bearish on PLN, ING’s FX strategist Frantisek Taborsky notes.
A higher EUR/USD to be positive for CEE
“Yesterday's reversal of core rates at the end of the day brings rather more uncertainty to the CEE market, given that local rates don't have much chance to find solid ground. But if anything, we see PLN rates reacting most to the core move, leading to further narrowing of the rate differential. This should keep PLN under pressure, which is also weighed down by the most long positioning within the CEE region.”
“Moreover, we have no data in Poland this week and we also don’t have an NBP meeting this month, and that's mostly supportive of PLN. On the other hand, EUR/CZK touched 25.250 yesterday and CZK shows the most resistance to the global move.”
“This morning we have retail sales data in Hungary and industrial production in the Czech Republic, but the focus will still be on the global story that dominates the markets. The positive here, though, is a higher EUR/USD, which should keep the CEE region at safer limits overall and prevent a bigger sell-off.”
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FXStreet Insights Team
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