EMEA FX Talking: Carry dominates fiscal problems

EUR/PLN: ZLOTY SOLID ROCK

• Because the FX Global (EUR/USD) market has been stable over the past few weeks, Zloty Poland has been stable in trading bound by reach (4,20-4.30). There are no signs of the weaknesses of the US labor market, increasing political risk in France, or increasing threats from Trump’s administration to Fed’s independence triggers significant market movements.
• An unexpected revision of the Poland (negative) ranking view by Fitch, Russian military provocation recently, and the deteriorating fiscal position was not enough to trigger Zloty’s substantial sales. Poland currency remains tough and stable.
• However, positive carry trading remains the main argument for the power of PLN, along with MPC rhetoric post-hot season which is slightly lacking. The basis of the domestic economy remains stable, with a solid growth view clearly outperforming the entire CEE region.

EUR/HUF: Sentiment can quickly turn against Forint

• Forint Hungary experienced an extraordinary summer, with the exchange rate of EUR/HUF down to 392 in early September. This is not a surprising development; The dollar gradually weakened, combined with a high -risk premium in local interest rates.
• While the determination of positions became more crowded, we slowly but surely target the level that can encourage some market players to consider the shift of monetary policy towards opportunistic easing, which can change waves for Forint.
• But other risks are also soaring. We think this will ultimately cause changes in trends. Fear of further fiscal expenditure and uncertainty about the upcoming general elections in the spring 2026 supports the bearish turnover in Forint.

EUR/CZK: Increasing differential differential support for CZK

• Czech economic expansion enters a more solid foundation, with consumption, construction, and new rebounds in the industry that provides support. The labor market is expected to switch to visual mode again at the beginning of next year, creating a beneficial environment for a strong increase in wages, with the dynamics of wages to become candidates for surprises upwards in 2026.
• Such arrangements, along with persistent price growth in the service sector and upward inflation risk associated with the implementation of ETS2 2027, show that the rate cutting cycle has ended. The level of stability is optimal taking for now; However, we see the risk of inflation and higher tariffs, which come from the red-heat housing market and optimistic expenditure for services.
• By remembering that, the real interest rate of the Czech 1% in August made Koruna assets interesting to hold. Meanwhile, the real level for Euro floated to zero in the same month, making differential levels very strong in real terms. Understandably, we see that such arrangements are useful for holding Koruna, and we stand by his side with a view for further gradual benefits vis-à-vis a single currency. Which said, the real US interest rate only gradually softened to 1.6% in August, and we hope that more stability in USD/CZK will look forward.

EUR/RON: There is no sharp movement seen for EUR/RON

• EUR/RON remains stable in the range of 5.05-5.08, continuing with what looks like a consolidated period. Catalysts for stronger development in pairs have been limited so far, and volatility remains low in September.
• Further fiscal reform and stability that regulates remain the main key for rating agencies, as well as the ability of the state to reduce its structural imbalance through the medium term. The current slowdown in consumption can have an impact on budget revenue, but in Flipside bring lower depreciation pressure originating from trade development.
• Considering the recent inflation surge, we think that the National Bank of Romania will maintain the key level unchanged at 6.50% until the second quarter of 2026, and we hope that policy makers will continue to hold firm grip on the currency, with short-term movements contained in the band 5.05-5.10 and the couple ended near 5.10.

EUR/RSD: Dinar’s stability to remain in its place in the near future

• EUR/RSD continues to trade in the range of 117.10-117.20 which are tight until early September. At this stage, Serbia maintains a strong macro fundamental position, with the development of sustainable infrastructure and wise fiscal policies to be the center of attention.
• At the September meeting, the National Bank of Serbia held the main policy level stable at 5.75%, choosing again to remain careful after the highest global uncertainty.
• The main inflation increased to 4.9% in July, going further outside the target tape 3 ± 1.5% NBS.
• We continue to expect FX’s stability to remain the main focus for banks to move forward. In addition, strong macro fundamentals in the country must prevent policy makers from experiencing great difficulties in maintaining partners around the current level in the near future.

USD/UAH: Further stabilization for Hryvnia

• Hryvnia’s exchange rate against the dollar remains widely stable for consecutive months (the tight range of 41.0-41.8), in part because the National Bank of Ukrainian efforts previously to tighten the monetary policy-the main policy level was raised by 250BP in less than a year-but also thanks to international entry.
• Apart from the ongoing war and the failure of peace talks between the US and Russia, the Ukraine economy is slowly improving. According to NBU, economic growth is recovering and inflation is stable, while the main indicator shows gradual increase and adaptation to geopolitical uncertainty. As a result, Hryvnia is also supported by increasing economic fundamentals.

USD/KZT: Signs of stabilization after mid-summer weakness

• Tenge is valued by C.1% to 535-540 per US dollar. Although this is a little far from our short-term expectations, the general direction is in line with our view that, after the weakness of the summer, Tenge ultimately has to find support from the recent two-digit growth in oil production and exports.
• FX sales net by the government and national bank Kazakhstan are estimated at around $ 1 billion in September, slightly higher than the volume of August. This shows moderate support for the FX market.
• This new pickup in CPI to 12.2% yoy in August exceeded NBK expectations, which means the possibility of high increase in key levels of 16.50% at this time at the coming meeting.

USD/Try: Appreciation of the real currency that is likely to continue

• The Turkish central bank recognizes that recent data supports concession that is continuously given: a) slowing in the underlying inflation trend despite the upward pressure related to food and services, b) weak final domestic demand in 2Q, although there is a higher GDP growth than expected and c) the condition of demand at the level of cleaning based on the latest data.
• The bank has indicated that there is no change in the framework of macroprudence and continuous level cutting (its size will depend on the view of inflation) and considerations regarding dollars and reserves, because we have the potential to see more market volatility around the court audience in the coming period. Given this background, the policy rate will reach 35.5% if CBT maintains a 250bp cut, while the decline to the 200bp cut will withdraw it to 36.5% at the end of the year.
• The central bank also considers the real appreciation of Lira as a natural result of its tight monetary attitude, which increases demand for currencies. Although we may not observe consistent appreciation in the short term, that is, in the month to month or quarterly, it is very possible that the lira will experience cumulative appreciation in a longer period, according to CBT.

USD/ZAR: a healthy environment for Rand

• Rand continues to have advantages, and the external and domestic environment looks constructive. On the external side, a lower level is both for global growth, and the increase in commodity prices is both for the requirements of South African trade. China also seems to make a stronger renminbi, which is also good for Rand.
• Domestically, the government seems to be catching up with a shift in the South African reserve bank to the 3%inflation target. Local government bonds are still in demand, where the 10 -year results have fallen 150bp.
• The 6%+ results will help in the rand in a friendly environment, and 0.5/0.7% SA account deficit runs GDP looks ok.

USD/ILS: Increased capital from technology companies helps ILS

• Apart from the current conflict and widespread threats in the region, shekel remains relatively bargaining. Economic activities are expected to rise back in the third quarter, where the domestic demand trend looks strong. Usually, Israel runs a large account surplus behind the service industry. The picture of the payment balance was also seen assisted by an increase in capital from Israeli technology companies. It is worth $ 5 billion in 2Q and is expected to reach $ 3 billion in this quarter.
• With a slight inflation above the top of the target range of 1-3% of Israeli banks, the policy rate has been detained at 4.50%.
• The soft dollar environment supports USD/ILS up to 3.10/20 next year.
  Source: Ing