CEE: Spotlight back on the forint - ING

This week, attention will again turn to the region's central banks. Today we start with some PPI growth in the Czech Republic and steadily elevated core inflation in Poland. Tomorrow, the National Bank of Hungary is scheduled to meet, and no change in rates at 6.50% is generally expected. The NBH doesn't have many options at the moment despite inflation and GDP surprising to the downside. Friday's move up in EUR/HUF again shows that the risk-off mood here persists, ING's FX analysts Frantisek Taborsky notes.

EUR/HUF to continue being the main focus this week

"Thursday also sees a central bank meeting in Turkey. Again, we should see rates unchanged here at 50%. The focus will be on communication given the higher-than-expected inflation numbers but also a rather dovish tone in the latest inflation report. We expect the first cut in December but obviously it will be a close call dependent on the next inflation print."

"CEE FX is still looking for new levels in the post-election environment. We remain generally bearish here. Lower EUR/USD, downside economic surprises and pricing in more rate cuts should continue to put pressure on FX. Additionally, Friday's sell-off in equity markets may bring back risk-off sentiment. The EUR/HUF will continue to be the main focus this week, having regained above 408 on Friday."

"We believe the NBH meeting will return this story to the spotlight and EUR/HUF will be near 410 again into the meeting. The market has outpriced earlier rate hike expectations, while we saw some rally in HUF rates last week. We think positioning in HUF remains short, but less so than before the election. On one hand, this gives the space to add new short positions. On the other, it suggests that the NBH should have the worst behind it."