CEE FX: Inflation supports koruna over peers – ING
ING’s Frantisek Taborsky expects higher September inflation across Czech Republic and Hungary, with Czech data seen backing a November rate hike. He forecasts unchanged policy in Poland and Romania, maintains a bearish regional FX bias, and favours the Czech koruna, which he sees as less tied to global narratives and likely to outperform more dovish CEE currencies.
ING economist Frantisek Taborsky anticipates rising September inflation across the Czech Republic and Hungary, suggesting a possible November rate increase. He maintains a bearish outlook for regional currencies, preferring the Czech koruna due to its lower dependence on global factors and its potential for outperforming more inflation-sensitive CEE currencies.
Czech inflation is forecast to jump from 1.9% to 2.5% this month, primarily driven by fuel price increases, surpassing the Czech National Bank's prior prediction of 2.2%. Core inflation expected to increase from 3.0% to 3.1% also reinforces the recommendation for a November rate increase. Hungarian inflation is anticipated to climb from 1.3% to 2.0%, again mainly due to fuel costs, exceeding the National Bank of Hungary's September projection of 1.7%.
The National Bank of Poland remains cautious, likely keeping rates unchanged at 3.75% following Thursday's press conference. Meanwhile, the National Bank of Romania is expected to hold steady at 6.50% during Thursday's meeting, with markets closely watching comments on recent EUR/RON fluctuations. While noting the Czech koruna's recent lows, Taborsky expects higher inflation to prompt a more aggressive stance from the Czech National Bank, potentially benefiting the koruna compared to its regional peers.
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