ING’s Frantisek Taborsky argues that Central and Eastern European markets remain highly exposed to the US–Iran conflict and rising Oil prices. While local data from Hungary, Turkey and Poland are due, he expects geopolitics to dominate. After Friday’s sharp rates sell-off, he sees renewed pressure on regional FX, especially EUR/HUF, where long HUF positioning is being unwound.
Geopolitics and energy risks hit CEE assets
“On Tuesday, Hungary will release its February inflation, which is expected to fall to this year’s lows of 1.5% YoY, below both market and National Bank of Hungary expectations. Of course, this is old news after the start of the US-Iran conflict, but it will be a starting point for further developments and inflationary pressures coming from higher energy prices.”
“On Thursday, the Central bank of Turkey will meet, where the current geopolitical developments and higher-than-expected inflation indicate a halt to the cutting cycle at 37%. On Friday, Poland will release its February inflation, where we expect stagnation at 2.2% YoY.”
“However, we will have to put the calendar aside for coming days again. The CEE region remains one of the most exposed markets to the US-Iran conflict globally and after Friday’s significant sell-off in rates, no calm can be expected today due to the continued rise in oil prices on the market.”
“Friday indicated that in addition to rates, FX is also coming back under pressure in the region and attention is returning to EUR/HUF, which the market sees as the most exposed to energy prices and the impact on inflation. At the same time, long HUF was the largest positioning within CEE3 and is understandably the most under pressure, which will be an indicator of stress in the region today as well.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
