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 consolidates near 0.7000 as USD stays weak

AUD/USD holds steady above 0.7000 during Thursday’s Asian session, consolidating the previous day’s recovery gains from a near three-week low as the Democratic sweep in the US midterm elections and Iran diplomacy hopes continue to weigh on the US Dollar. Bulls, however, seem hesitant as focus shifts to Friday’s crucial US NFP report.

USD/JPY drifts lower to 158.25 on hawkish BoJ Minutes, weak USD

USD/JPY trades with a negative bias for the second straight day on Thursday as hawkish BoJ Minutes, showing members agreed to keep raising rates, and intervention risks support the Japanese Yen. Meanwhile, US midterm election results and hopes for Iran diplomacy keep the US Dollar depressed as focus shifts to Friday’s US NFP report.

Gold trims gains, returns to $4,100

Gold now surrenders part of its initial bull run and appears on its way to challenge the key $4,100 region per troy ounce on Thursday. The precious metal extends it recovery on the back of the tepid advance in the Greenback and mixed US Treasury yields following the US midterm elections.

XRP gains ground as Ripple CEO says US crypto users aren’t going anywhere after midterms, calls for clear rules

Ripple (XRP) ticks higher on Thursday, trading near $1.32. The remittance token is up roughly 10% from last week’s trough at $1.20, suggesting that the path of least resistance is gradually flipping upward.

NFP stress test: Six payrolls releases, measured in daily-loss limits

Friday's US employment report is usually previewed in terms of the headline number and the reaction in the Dollar. For a growing group of traders, those running funded or evaluation accounts with a fixed daily loss limit, there is a more practical question: how much of that limit can the first hour consume, regardless of direction?

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.