CEE FX: Prolonged pressure from strong Dollar – ING
Frantisek Taborsky at ING argues that the stronger US Dollar (USD) following the Federal Reserve (Fed) meeting is clearly negative for emerging markets, keeping Central and Eastern European (CEE) currencies under pressure.
Frantisek Taborsky, an analyst at ING, states that the stronger US Dollar following the Federal Reserve's meeting negatively impacts Central and Eastern European (CEE) currencies. He anticipates further regional weakness, predicting EUR/PLN to rise again, EUR/HUF to be vulnerable, and EUR/CZK to surpass 24.350 following a dovish Czech National Bank (CNB) decision.
After a significant EUR/PLN spike yesterday, the zloty may stabilize before moving higher once more. EUR/HUF appears more susceptible to further upside, given the current global conditions and the upcoming NBH meeting. A hawkish decision from the CNB, such as pausing rate cuts and lowering the inflation target, could provide support to the forint.
Today, the focus shifts to the CNB meeting, where rates are expected to remain unchanged at 3.75%. Despite recent shifts in CEE conditions, the CNB is anticipated to maintain its current stance. Consequently, the outcome is likely to be dovish compared to market expectations, which suggest more than four rate hikes. EUR/CZK approaches the meeting priced just above 24.300, consistent with the CNB preview published last week.
A dovish message, coupled with adverse global factors, is expected to push EUR/CZK higher, possibly exceeding 24.350.
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