The forex market has completely shifted into a risk aversion mode and the entire emerging markets space took a hit yesterday. The CEE region led the losses days earlier, so it lagged yesterday, notes Frantisek Taborsky, currency strategist at ING.
CEE currencies likely to remain under pressure
“However, the situation in the Middle East does not appear to be close to calming down and, although we are receiving more dovish news from the developed market world, CEE currencies are likely to remain under pressure for some time, but the fundamentals for a subsequent fade movement remain strong in our view. The rapid decline of EUR/USD will continue to keep CEE currencies under pressure.”
“While we can assume that local rates will not maintain current levels for long if central rates continue with yesterday’s trend, in Poland and the Czech Republic more than enough rate cuts have already been priced in and room to fall is “In addition, we could get some hawkish news from Poland’s central bank this week and from the Czech Republic with the release of September inflation data next week.”
“So, across the EEC, we see a growing divergence in the currency and rates market that will have to close at some point in the future, opening the door to fading the current currency weakness. The Polish zloty looks the most attractive with the central bank meeting this week, while the Czech koruna may be attractive later on. The Hungarian forint, on the other hand, will have the most difficult path to find a stable base within its CEE peers, in our opinion. “
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
