The Central and Eastern European (CEE) region is set to regain its allure after a period of relative calm. Today, we anticipate the release of Purchasing Managers’ Index (PMI) data, which is expected to confirm the prevailing industry pessimism. Additionally, tomorrow, the Czech Republic will unveil second quarter wage figures, with a projected slight decline from 7.0% to 6.8% year-on-year (YoY) in nominal terms, falling short of Czech National Bank (CNB) forecasts, as highlighted by ING’s FX strategist Frantisek Taborsky.
CEE FX Market Analysis
Looking ahead, we foresee a series of key events in the CEE region. In Turkey, August inflation is anticipated to decrease from 61.8% to 51.9% YoY, based on our estimates. Furthermore, Hungary is scheduled to reveal the breakdown of its second quarter GDP performance. On Wednesday, the National Bank of Poland is expected to maintain interest rates at 5.75%, aligning with market expectations. Subsequently, Thursday will see the customary press conference by the National Bank of Poland governor. Closing the week, the Czech Republic and Hungary will publish industrial production data for July, along with Romania’s second quarter GDP breakdown.
Moreover, a lineup of speakers is lined up for the week. In Hungary, the finance minister and central bank governor are slated to address a local conference on Thursday. Additionally, EU ministers will convene in Hungary during the latter part of the week to deliberate on cohesion policy and EU funding.
Assessing the CEE FX market, we find current pricing to be relatively fair. While the EUR/USD pair has been on a downward trend in recent days, this movement has not completely impacted CEE FX rates. Conversely, substantial rate differentials persist, which should uphold CEE FX at elevated levels. Overall, we maintain a slightly bullish stance on the Czech koruna (CZK), which has been inching below 25.00 EUR/CZK in line with our long-standing outlook. Similarly, we hold a positive outlook on the Polish zloty (PLN), following a swift rebound from last week’s sell-off. Conversely, we anticipate a potential plateau for the Hungarian forint (HUF) and foresee a potential reversal in the EUR/HUF exchange rate.
Analysis and Implications
In summary, the CEE market is poised for a dynamic week ahead, with key economic indicators and events set to shape investor sentiment. From PMI releases to central bank decisions and GDP breakdowns, market participants can expect heightened volatility in the region’s FX market. Understanding the nuances of each currency’s performance and the impact of external factors like rate differentials is crucial for making informed investment decisions. As such, staying abreast of developments and expert analysis can help individuals navigate the ever-evolving CEE market landscape and optimize their financial strategies.