Frantisek Taborsky from ING emphasizes that the exchange rate in Central and Eastern Europe is influenced by global headlines and hawkish sell-offs in the US, with local data having restricted impact. Despite higher interest rate expectations in Poland and the Czech Republic, it warns that a stronger dollar and risk-off sentiment are putting pressure on regional currencies, leaving the most exposed zloty in the 4.225-4.265 range.

A region affected by the sell-off in the US and the sell-off in emerging markets

“Global headlines and hawkish US sell-offs continue to shape the region’s history, while Central and Eastern Europe’s busy calendar has only a limited impact.”

“Last week, there was a strong hawkish sell-off in the CEE market, not only due to Friday’s US labor market data. Market valuations returned to almost three interest rate increases in Poland and almost four rate increases in the Czech Republic in a one-year horizon.”

“Despite support from higher interest rates in the local market, however, a stronger US dollar is leading the way for currencies in Central and Eastern Europe. The region is following the sell-off in emerging markets, erasing gains from previous days.”

“At the same time, the risk-free sentiment prevailing in global stock markets and interest rates suggests greater headwinds for the CEE region in the coming days.”

“At the moment, the Polish zloty appears to be the most sensitive currency in the region, given the dovish history of the National Bank of Poland, with the possibility of testing the upper limit of the current range of 4.225-4.265.”

(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor.)