CEE FX: Forint and Lira Seen Under Pressure – ING

Why It Matters

Elevated energy‑driven inflation and delayed rate cuts could destabilize CEE markets, affecting capital flows and investor risk appetite across the region.

Key Takeaways

• Iran‑related energy shock lifts oil, gas prices regionally.
• Higher energy costs boost inflation expectations in Hungary, Turkey.
• EUR/HUF projected to face strongest upward pressure.
• Turkey’s central bank likely to cap USD/TRY moves.
• Rate‑cut plans postponed across CEE central banks.

Pulse Analysis

The ongoing Middle East conflict has transformed into an energy shock for the CEE region, which relies heavily on imported oil and gas. As Tehran‑linked supply concerns tighten global markets, oil and gas prices have risen sharply, reinforcing a stronger US dollar. This combination fuels a risk‑off sentiment that typically depresses emerging‑market currencies, setting the stage for broader volatility in Central and Eastern Europe’s foreign‑exchange landscape.

Inflation dynamics differ markedly across the region. Turkey’s economy is the most exposed: a 10% rise in oil prices could add roughly 1.1 percentage points to its CPI, while Hungary would see a 0.45‑point increase, and the Czech Republic only 0.2 points. These disparities pressure central banks to reconsider previously anticipated rate cuts, prompting a collective “wait‑and‑see” stance. Policymakers must balance inflationary pressures against growth concerns, especially as reserves and fiscal buffers vary widely.

Currency forecasts reflect these macro forces. The forint is expected to weaken against the euro, making EUR/HUF the most pressured pair, whereas the Turkish lira may find temporary support from the central bank’s forward‑market interventions and record FX reserves, keeping USD/TRY relatively stable. Investors should monitor the National Bank of Poland’s upcoming decision as a bellwether for regional monetary policy. Overall, the energy‑driven inflation surge and delayed easing cycles signal heightened caution for CEE FX exposure.