CEE FX: Hawkish repricing supports regional currencies – ING
ING strategist Frantisek Taborsky reports that Polish inflation surprised to 3.4% on higher fuel prices, while food prices fell, and a busy data calendar looms for Central and Eastern Europe.
ING strategist Frantisek Taborsky notes that Polish inflation unexpectedly rose to 3.4% in August due to higher fuel prices, while food prices fell. This strong data, coupled with geopolitical tensions and the Federal Reserve's hawkish comments, has shifted Central and Eastern European markets back into a more aggressive stance.
Czech and Polish markets now anticipate multiple interest rate hikes, which should help stabilize CEE FX and limit further weakness. The Czech Republic will release wage data on Thursday, with an expected slowdown in growth from the strong 8.1% recorded in the first quarter. Turkey's inflation is also due, with a modest decline expected from 1.8% to 1.6% month on month.
Later on Friday, Czech inflation is predicted to rise from 1.7% to 1.9%, matching the central bank's forecast. Retail sales data from the Czech Republic and Hungary will also be published. With these hawkish expectations and widening rate differentials against the euro, the Czech market remains optimistic and could support further gains today.
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