According to ING strategist Frantisek Taborsky, Central and Eastern European (CEE) currencies are experiencing renewed pressure due to a stronger US dollar and declining oil prices. These developments have led markets to largely outprice most anticipated rate hikes in Poland and the Czech Republic, resulting in weaker regional foreign exchange performance [1].
In Poland, attention is focused on the upcoming June inflation figures, set to be released on Tuesday. ING economists expect Polish inflation to decrease from 3.1% to 2.9%, primarily driven by lower fuel prices and a significant downward surprise in May, which was mainly attributed to food prices [1]. This anticipated decline in inflation is expected to confirm that the National Bank of Poland will keep interest rates unchanged for the remainder of the year [1].
For Turkey, June inflation data will be published on Friday. ING forecasts that monthly inflation will moderate further to 0.8%, bringing the annual figure down to 31.9% from 32.6% in the previous month, indicating a resumption of the downward trend [1].
Weekend headlines from the Middle East are expected to result in a mixed market opening, and, combined with the stronger US dollar, suggest continued pressure on CEE currencies. The EUR/PLN exchange rate could test 4.290 again, but ING believes 4.300 will act as sufficient resistance for now [1].
CONCLUSION
The combination of a stronger US dollar and lower oil prices is exerting pressure on CEE currencies, with rate hike expectations in Poland and the Czech Republic being largely priced out. Upcoming inflation data in Poland and Turkey will be closely watched, but current forecasts suggest central banks will keep rates on hold, maintaining a cautious outlook for regional FX markets.