Some of the best performing currencies in the CEE region have started to hand back some of their gains as markets question whether central banks will have to turn more dovish. That's particularly been the case in Hungary. However, our call is that rate cuts are delayed, and the forint can continue to enjoy carry trade interest. CZK and ZAR should also do well
We expected CPI inflation to increase slightly in September from August amid a shallower annual decline in fuel prices – but low food prices surprisingly kept the headline figure unchanged, bolstering the argument for more rate cuts. Even so, we expect the National Bank of Poland (NBP) to postpone the move until November
The Polish Statistical Office has revised August’s year-on-year CPI inflation upward to 2.9%, from the initial flash estimate of 2.8%. However, we estimate that core inflation eased to 3.1% YoY, maintaining its downward trajectory. We expect policymakers to deliver one more 25bp rate cut this year, in November
The euro’s outlook remains tied to developments on US tariffs and on Ukraine peace talks. EUR/USD took a hit late Friday after the Trump-Zelenskyy incident, but has rebounded since trading resumed on Sunday evening – perhaps on the news that Ukraine remains open to a mineral deal with the US and that the EU is actively trying to bring the US back to the negotiating table with Ukraine.
The UK published on Friday data showing a net public sector surplus of £15.4bn in January, which fell short of the £20bn estimated by the Office for Budget Responsibility in October alongside the Budget.
