CEE FX: Regional currencies find support from relief – ING

US midterm election results, a weaker Dollar and falling US Treasury yields are adding to the recent relief in EM and CEE assets prompted by US–Iran headlines and lower energy prices, according to ING’s Frantisek Taborsky. His outlook is for CEE rates to fall and EUR/CZK to hold steady around 24.300–24.350. With rate rises already priced in and the NBP maintaining a dovish stance, the zloty remains under pressure, while EUR/PLN could settle near 4.410–4.420.

Midterms and cheaper energy support markets as local central banks take focus

"The US midterm election results point to a scenario that is already well-priced, with limited implications for the EM and CEE regions at this stage. A weaker US dollar and lower 10-year Treasury yields should further support the general sense of relief seen in recent days, driven by headlines regarding US-Iran negotiations and lower energy prices."

"While the future trajectory of the conflict remains unclear following the midterms, the market currently signals a continuation of this relief. This should help push CEE rates lower and ease pressure on regional currencies."

"We anticipate that the CNB will hike interest rates tomorrow and present a new forecast."

"Consequently, the EUR/CZK pair should remain within the 24.300–24.350 range."

"In Poland, the National Bank of Poland is expected to keep interest rates unchanged at 3.75% today and will present a new forecast. Greater attention should be paid to tomorrow’s press conference, which is expected to provide further forward guidance."

"While some political relief yesterday may have reduced pressure on the zloty, our overall outlook remains bearish due to the NBP’s dovish stance. Given that a significant portion of rate hikes – roughly 75bp – has already been priced in, the EUR/PLN pair could stabilise within the 4.410-4.420 range."

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