Quiet week favors stronger FX – ING

The second half of the month is usually quieter in the CEE region. PPI in the Czech Republic and core inflation in Poland for August will be published today. In both cases, markets are expecting year-on-year numbers unchanged from the previous month. Tomorrow in Romania the industrial production for the month of July will be published. And on Thursday, we will see industrial production and wages in Poland, notes Frantisek Taborsky, FX strategist at ING.

Dovish Fed story should support CEE FX

“On the central bank side, the Central Bank of Turkey is scheduled to meet on Thursday. We expect rates to remain unchanged at 50% and the main focus to be on central bank communication. We believe that the recent macroprudential tightening measures of the CBT have underlined the call for determination. Our economists expect the first rate cut in November, later than markets are currently pricing in.”

“This week, we have scheduled speakers in the ECE region. The Czech National Bank’s lock-in period starts on Wednesday, so we can expect some statements from the Board before then. However, another 25bp rate cut looks like a done deal, and what’s more important is the outlook for next year. In Hungary, the economy minister will address a conference on Tuesday – the same day as the country’s deadline to pay the EU fine, which could trigger some headlines. Also, the prime minister is scheduled to address the European Parliament on Wednesday.”

“FX in the region this week will be more about a global story and the Fed decision. However, a fairly favorable story should support CEE FX. We are bullish on the CZK, which could get a boost this week from a CNB-type statement. We are also bullish on HUF, which is getting stronger after misleading headlines on fiscal policy, while rates favor a stronger currency. We remain neutral on PLN.”