The National Bank of Poland kept its message broadly neutral and little changed from June, while acknowledging lower oil prices, weaker growth in Poland’s key trading partners and a recent fall in inflation. Uncertainty rose as Middle East tensions pushed CPI projections above expectations, contributing to a sharp repricing across Central and Eastern Europe after US–Iran headlines.
CEE rates and FX sold off, and EUR/HUF jumped 1.2%, described as the largest upside move since early March at the start of the conflict. In the Czech Republic, the market added half a rate hike to pricing for a total of one and a half hikes, while in Poland expectations shifted back from a 50% probability of a rate cut to a view of stable rates for longer. The forint’s sensitivity was linked to heavy long positioning since April’s general election and Hungary’s central bank signalling a series of rate cuts in June, making it an outlier in the region; EUR/HUF around 360 was framed as a level for potential new long positions if geopolitics eases and the pair returns below 356.
Middle East Tensions Drive Sharp Market Reaction Across Central and Eastern Europe
We saw a sharp reaction across CEE currencies this week due to renewed tensions in the Middle East, pushing investors towards safer assets. In Poland, the NBP maintained its neutral stance, holding its key rate at 5.75% as expected, citing balanced risks to their economy. This predictable move from Warsaw contrasted sharply with the volatility seen elsewhere.
The Hungarian Forint was hit particularly hard, with EUR/HUF spiking over 1.5% to touch 398.00, its biggest single-day loss since the first quarter. This sharp move is a classic reaction for the Forint, which carries significant risk due to heavy long positioning by speculators over the past year. The currency’s vulnerability is magnified by the National Bank of Hungary’s dovish policy, as it remains the only central bank in the region actively cutting rates, with inflation still running at a reported 4.1% for June 2026.
Tactical Opportunities for Traders Amid Geopolitical Uncertainty
We believe the current spike presents a tactical opportunity if these geopolitical flare-ups prove short-lived, a pattern we observed during similar events in late 2023 and early 2025. For traders, this means considering options strategies that benefit from a calming of tensions and a stronger Forint. Specifically, buying EUR/HUF put options with a strike price around 395.00 for late August could offer a cost-effective way to position for a return to the 392.00 range.
