Central and Eastern European (CEE) currencies, including the Hungarian Forint (HUF), are expected to weaken by approximately 3% against the Euro (EUR) this week, according to Societe Generale, as the EUR/USD exchange rate falls below 1.14 [1]. The Hungarian central bank, Magyar Nemzeti Bank (MNB), maintained its policy rate at 5.50% and reduced its inflation target from 3% to 2.5% starting in 2028, aligning with Hungary's goal to adopt the Euro by 2030. This hawkish policy stance briefly pushed the EUR/HUF to its 100-day moving average at 359.76 and caused 10-year Hungarian government bond yields to rise by 11 basis points to 5.87% [1].
In Poland, the EUR/PLN exchange rate briefly surpassed 4.40 for the first time in two years following Moody’s downgrade of Poland’s credit rating to A3 with a negative outlook, citing fiscal deterioration, large deficits, and rising debt. Additionally, Poland reported a 42-second violation of its airspace by a Russian helicopter, just days after Prime Minister Tusk warned of potential Russian strikes against NATO allies [1].
The Czech Republic’s 10-year government bond yield approached a four-year high of 5.40% after the cabinet approved a CZK386 billion budget deficit for 2027, the second largest on record. The government also reintroduced fuel price regulation and implemented a temporary diesel excise tax cut for October [1].
Romania saw the EUR/RON rise above 5.27 and its 10-year government bond yield exceed 7.45% as concerns mount over a potential ratings downgrade to junk status amid ongoing political deadlock. S&P is scheduled to review Romania’s rating in late October or early November, but an unscheduled announcement is not ruled out. Meanwhile, PM-designate Muresan is seeking a confidence vote next Tuesday and is attempting to secure Social Democrat support, which may involve policy concessions [1].
CONCLUSION
Central and Eastern European currencies are under significant pressure due to policy risks, fiscal concerns, and political instability, leading to notable market reactions and rising government bond yields. The outlook remains cautious, with potential for further volatility as rating agencies review sovereign credit standings and political developments unfold.