ING’s Frantisek Taborsky says Central and Eastern European FX have benefited from an improvement in global risk sentiment, even if higher energy prices still signal some inflation. The market has cut rate hike expectations to 1-2 steps from 2-3 since the US-Iran conflict began, while the upcoming Czech National Bank and National Bank of Hungary meetings are expected to push against a hike.
Relief rally reduced again due to increase
“With improved global sentiment despite energy prices remaining high, the last two days have seen some relief in the region. While current oil and gas price levels will mean some additional inflation in the region, the market is likely assuming that dark scenarios are not in the cards for the time being. The market has thus far reduced the number of rate hikes since the start of the US-Iran conflict and this week we went from about 2-3 hikes across the region to the current 1-2.” Have moved forward.”
“Although the market is stabilizing and liquidity is returning, it is certainly not possible to rule out a re-escalation of tensions and another sell-off under pressure from another surge in energy prices, as we saw last week.”
“However, for now, there is nothing else to do but go with the risk-on flow, and although we have already cut all rates in the CEE region from our forecast, a rate hike still seems a long shot for us under current market conditions.”
“We will see the Czech National Bank meeting tomorrow and the National Bank of Hungary meeting next week. In both cases, we can expect a reaction against raising rates and the market has an opportunity to get rates higher here.”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor.)
