Central and Eastern European rate curves have repriced sharply, with markets now implying about 60bp of tightening in the Czech Republic and 40bp in Poland, while pricing roughly 50bp of easing in Hungary over an 18-month horizon. Over the past two sessions, regional curves have shifted by around 15–30bp. The adjustment in implied paths has not been fully mirrored in FX, after rates and currencies diverged over the past two weeks.
ING expects further normalisation in pricing to continue this week, unless a renewed escalation in the US-Iran conflict lifts oil prices further. In that setup, it looks for the Polish zloty and Hungarian forint to strengthen, targeting EUR/PLN below 4.300 and EUR/HUF below 358 despite narrower rate differentials. By contrast, EUR/CZK is seen moving above 24.200, with the cross having tracked rates more closely and with dovish Czech National Bank comments this week potentially adding to upward pressure.
Derivative Opportunities Amid Shifting Currency Dynamics
We see a compelling tactical window for derivative traders in Central and Eastern European (CEE) currencies as rate curves across Poland, Hungary, and the Czech Republic sharply reprice. With recent data showing Polish inflation sticky at around 4% and the National Bank of Poland holding rates at 5.75%, the region’s currency dynamics are shifting. We recommend positioning for a stronger Zloty and Forint, while preparing for a weaker Czech Koruna over the coming weeks.
To capitalize on this, option traders should look to buy EUR/PLN put options or enter short positions targeting a move below the 4.300 level. Poland’s robust economic growth, which recently clocked in at 3.2% year-on-year, continues to draw foreign inflows despite narrower rate differentials. This underlying strength suggests the Zloty is poised to catch up to the rates market and appreciate.
Strategic Positioning in Forint and Koruna
Similarly, we favor directional strategies that benefit from a stronger Hungarian Forint, targeting EUR/HUF downside below 358. Even though the National Bank of Hungary has eased policy significantly from its historical 13% peak, we believe the market has over-adjusted to this dovishness. Historically, when these extreme easing expectations normalize, the Forint experiences rapid recovery phases.
In contrast, we advise buying EUR/CZK call options or structuring topside barriers to target a move above 24.200. The Czech Koruna has closely tracked falling local rates, and further dovish comments expected from the Czech National Bank will likely weaken the currency. This divergence makes a long EUR/CZK position an ideal relative-value play against your long Zloty and Forint exposures.
