CEE FX: CNB turns dovish while NBP adopts a hawkish stance – ING

Expectations for at least two further rate hikes contrast with the Czech National Bank’s dovish signal, according to ING’s Frantisek Taborsky, who anticipates a hawkish repricing. Despite renewed upward pressure on EUR/CZK, he expects the pair to trade within a 24.350–24.400 range as seasonal strength supports the koruna. The National Bank of Poland’s shift towards a more hawkish stance may lend support to the zloty, but global risk aversion remains the main influence on CEE currencies.

CNB Signals Caution as NBP Adopts a More Hawkish Stance

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"The market interprets this as a dovish signal, suggesting the CNB is unwilling to hike rates further unless the inflation situation deteriorates significantly. For the first time since the onset of the US-Iran conflict, the CNB’s forecast aligns closely with market pricing, with the PRIBOR rate peaking at around 4.55%. However, inflation is expected to worsen over the remainder of the year, approaching 3% and nearing 4% in 27Q1."

"We do not believe the current shift in energy prices justifies such a rally in CZK rates. Consequently, we view two additional rate hikes as the minimum the market will tolerate, and we anticipate a hawkish repricing."

"EUR/CZK is facing renewed upward pressure. Indeed, if we take the shift in rate differentials at face value, the rates point toward 24.450."

"Furthermore, the koruna benefits from strong seasonal support in November and December, which should help temper the current weakening pressure following the dovish CNB meeting. We therefore anticipate a new range of 24.350-24.400, little changed from our pre-meeting expectations."

"For now, it is clear that the zloty may receive some support from the NBP’s shift toward a more hawkish stance. Nevertheless, global factors remain the primary driver; yesterday’s trading saw a rapid swing back to risk-off sentiment, renewing pressure on CEE currencies."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)