ING analyst Frantisek Taborsky anticipates a risk-off tone in Central and Eastern European (CEE) markets, driven by higher oil prices and geopolitical tensions, which are expected to test the already elevated pricing of central bank rate hikes in the region [1]. According to Taborsky, recent geopolitical headlines over the weekend suggest that markets will open with a risk-off mood, further pressuring CEE currencies and supporting curve flattening [1].
Key upcoming data releases include March inflation figures for Poland and Turkey, as well as regional Purchasing Managers' Index (PMI) data, which are expected to reflect the impact of the global energy shock [1]. In Poland, ING forecasts a spike in inflation from 2.1% to 3.5% year-on-year, surpassing market expectations and returning to levels seen in mid-year last year [1]. For Turkey, ING expects a slowdown in month-on-month inflation from 3.0% to 2.2%, but notes that the year-on-year figure will rise from 31.5% to 32.2% due to the lingering effects of the fuel shock [1].
The CEE PMI for March, scheduled for release on Wednesday, is not expected to be fully impacted by the US-Iran conflict, but ING highlights that the risk remains tilted to the downside compared to market expectations [1]. Overall, ING suggests that higher inflation and curve flattening are likely to weigh on CEE currencies in the near term [1].
CONCLUSION
ING expects CEE currencies to face continued pressure from rising inflation and energy shocks, with upcoming data releases likely to reinforce these trends. The risk-off tone in the region, driven by geopolitical tensions and higher oil prices, is anticipated to test market expectations and central bank rate hike pricing. Market participants should prepare for heightened volatility and downside risks in CEE FX markets.