The mode of complete elimination of the activated risk – ING

The forex market went into full de-risk mode and the entire emerging market space got hammered yesterday. The CEE region led the losses a few days before, so it was left behind yesterday, notes Frantisek Taborsky, FX strategist at ING.

CEE currencies are likely to remain under pressure

“However, the situation in the Middle East does not seem close to calming down, and while we receive more favorable news from the developed market world, CEE currencies are likely to remain under pressure for some time, but the fundamentals for a movement that fades later remain strong. in our view. EUR/USD’s rapid decline will continue to keep CEE currencies under pressure.”

“While we can assume that local rates will not maintain current levels for long if base rates continue yesterday’s trend, more than enough pricing has already been set in Poland and the Czech Republic, and room for downside is limited. In addition, we may get some bad news from Poland’s central bank this week and from the Czech Republic with the release of September inflation data next week.”

“Thus, in CEE, we see a growing divergence in the currency market and exchange rates that will need to be closed at some point in the future, opening the door to easing the current currency weakness. The Polish zloty looks most attractive at this week’s central bank meeting, while the Czech crown may be attractive later. The Hungarian forint, on the other hand, will have the hardest path to find stable ground among its CEE peers, in our view.”