ING’s Frantisek Taborsky notes that escalating US-Iran tensions are driving risk-off sentiment, overshadowing a light Central and Eastern Europe data calendar. The National Bank of Poland (NBP) may still consider cuts, while Turkey’s central bank is expected to hold at 37% and Hungary to trim rates to 5.75%. ING sees EUR/HUF peaking around current levels as recent forint weakness reflects positioning and profit-taking.

US-Iran tensions weigh on CEE assets

"Market attention remains focused on the US-Iran conflict, with global sentiment still the main driver for CEE. The regional calendar is relatively light this week, with few releases likely to challenge the broader global narrative."

"Following the latest escalation in the US-Iran conflict before the weekend, with no clear signs of de-escalation, risk-off sentiment is likely to persist this week and keep CEE assets under pressure."

"In Turkey, inflation expectations will be the final key release before Thursday’s Central Bank of Turkey meeting, where we expect rates to stay at 37% and funding to remain at the upper end of the corridor. The Hungarian central bank is very likely to cut rates by 25bp to 5.75%, as signalled by the governor at the previous meeting."

"Forward guidance will be key, particularly on whether recent FX pressure has shifted the bank’s view."

"In FX, the forint has been hit hardest, reflecting crowded long positioning and the prospect of further central bank easing. EUR/HUF traded around 363 on Friday, close to post-election levels."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)