ING’s Frantisek Taborsky expects Central and Eastern European FX to start the month cautiously despite improving sentiment and busy local data. He sees limited room for further hawkish repricing in Poland and the Czech Republic, more scope for dovish moves in Hungary, and notes EUR/HUF’s four-year low, with 350 still the bank’s mid-year target for the pair.

Poland, Czech Republic and Hungary in focus

"With sentiment improving into the end of last week but Middle East headlines remaining mixed over the weekend, we expect a cautious start to trading in CEE today."

"Recent sessions have seen a notable pullback in rate hike pricing in Poland and the Czech Republic (now down to around two hikes on average), while Hungary has seen easing expectations extend to nearly five cuts."

"In our view, there is still room for more dovish pricing in Hungary, but only limited scope for further repricing in Poland and the Czech Republic, where around 1.5 hikes looks like a floor for the current rally."

"EUR/PLN and EUR/CZK are trading near the lower ends of their recent 4.225-260 and 24.260-360 ranges respectively, but neither pair offers a compelling stronger-conviction story at this stage."

"While the positive momentum should persist despite stretched long positioning, any further HUF gains are likely to be more gradual, with 350 in EUR/HUF still our mid-year target."

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