Central and Eastern European currencies remain under pressure despite recent gains in the forint, zloty and koruna. With Czech Republic and Hungary markets closed on Friday, thinner holiday liquidity may reduce risk-taking during the long weekend amid geopolitical uncertainty.
EUR/PLN and EUR/CZK remain close to local highs. A partial reversal of the recent EUR/HUF fall is expected, with a move back to 390 described as unlikely.
Turkey releases March inflation data on Friday. Month-on-month inflation is forecast to slow from 3.0% to 2.2%, while year-on-year inflation is expected to rise from 31.5% to 32.2%.
The higher annual reading is linked to conditions after a fuel shock. Central Bank of Turkey rate cuts are expected to remain off the agenda for the next few months, pending clearer evidence on oil prices and domestic inflation pressures.
The recent strength in the Forint, Zloty, and Koruna feels fragile given the thin holiday markets and persistent geopolitical uncertainty. We see this as an opportunity to purchase protection against a reversal in the coming weeks. Derivative traders should consider buying out-of-the-money EUR calls against the PLN and CZK, as these pairs remain near their highs and are vulnerable to a risk-off shift.
Looking back, we saw a period of relief in 2025 when Polish inflation dipped below 3% and the Czech National Bank began carefully cutting rates from their cycle highs. However, current global energy price uncertainty threatens to unwind that progress, keeping pressure on central banks and their currencies. This history suggests any positive currency moves are likely to be short-lived.
In Turkey, the expectation for upcoming inflation data confirms that rate cuts are a distant prospect. We recall the central bank’s aggressive rate hikes to 50% during 2025, which have struggled to contain inflation that still runs well over 60% annually. This high-rate environment makes selling USD/TRY forward contracts attractive to capture the interest rate differential, though the underlying volatility remains a significant risk.
This broader uncertainty suggests that implied volatility in these currency pairs will remain elevated. Traders should favor buying options to define risk rather than taking outright spot positions, which could be vulnerable to sharp moves in illiquid markets. A simple put option on the Hungarian Forint offers a clear, limited-risk way to position for a move back toward the 390 level against the Euro.
