CEE FX: Rating downgrade adds to regional FX pressure – ING

FXStreet Insights Team FXStreet

ING strategist Frantisek Taborsky says Moody’s downgrade of Poland to A3 adds to pressure on CEE assets at the start of a relatively quiet second half of the month. With high energy prices, a stronger US Dollar and limited progress in the US-Iran conflict weighing on the region, ING maintains a bearish view on CEE currencies. ING sees 24.300–24.350 as fair value for EUR/CZK and further upside risk in EUR/PLN, while EUR/HUF could rise near term before potential support for the forint around the NBH meeting pulls the pair back towards 362.

Downgrade reinforces weak CEE FX

"The second half of the month is typically quieter in CEE, with little beyond tomorrow's National Bank of Hungary's meeting likely to attract market attention. Headlines from the Middle East and US over the weekend suggest a slightly positive open for markets today. On Friday, Moody’s downgraded Poland to A3, bringing its rating in line with S&P and Fitch. Although bond markets may have partly priced this in, some aversion to Polish bonds is likely this morning."

"Today’s calendar includes Poland’s August wage data, a key indicator for the central bank. Polish retail sales follow tomorrow, alongside the National Bank of Hungary meeting. The NBH is expected to pause its current “mini” easing cycle, leaving the policy rate at 5.50%. It will also publish a new forecast and may review its inflation target, potentially outlining a two-step reduction from 3.0% to 2.0%."

"In the Czech Republic, consumer demand data is due on Thursday, followed by Friday’s Czech National Bank minutes, which should provide more detail on last week’s board discussion."

"CEE currencies remain weak, and we retain a bearish outlook for the week ahead. Limited progress in the US-Iran conflict, high energy prices and a stronger US dollar should continue to hinder any recovery. After last week’s CNB meeting, we still see 24.300–24.350 as fair value for EUR/CZK."

"By contrast, EUR/PLN has further upside potential, with today offering an early test after the rating downgrade. EUR/HUF may rise today, but tomorrow’s NBH meeting should provide temporary support to the forint, potentially allowing EUR/HUF to test 362."

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

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.

AUD/USD sticks to neutral bias above 0.7100 amid cautious markets

AUD/USD holds steady above 0.7100 in the Asian session on Monday as the US Dollar stalls its modest pullback from the highest level since late July amid persistent geopolitical uncertainties. The PBOC status quo on Loan Prime Rates also weighs on the Aussie. However, bets on another RBA rate hike continue to underpin the Australian Dollar ahead of the Trump-Xi Summit.

USD/JPY eases below 157.00 amid looming intervention risks

USD/JPY is easing back below 157.00 in Asia on Monday, undermined by modest Japanese Yen strength amid looming intervention risks after Friday's BoJ rate check. A Japanese holiday also keeps traders on edge amid escalating geopolitical tensions between Russia and Ukraine and in the Middle East. As a result, the US Dollar pauses its pullback, limiting the pair's downside.

Gold: Sellers test $4,350 on renewed USD upside

Gold kicks off the new week on a weaker note following Friday's failure near the $4,400 mark. The commodity currently trades near the $4,350 level as traders await further developments surrounding the Middle East crisis and their implications for inflation. This would influence interest rate expectations and, in turn, drive the non-yielding bullion.

Dogecoin extends gains as ETF inflows return and momentum improves

Dogecoin extends its recovery, trading above $0.088 after gaining nearly 6% last week. The bullish price outlook is supported by the return of institutional demand through DOGE spot Exchange Traded Funds. Meanwhile, improving momentum indicators and signs of whale accumulation suggest a positive outlook for the dog-themed meme coin.

Economics week ahead

This week is light on the domestic data front, with focus on Thursday's new home sales report. We expect sales to partially recover in August, rising 2.6% to a 623K pace after a sharp decline in July. Higher mortgage rates continue to weigh on affordability and demand, though builder incentives remained in place and conditions did not worsen materially during the month.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.