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Hungary's forint steadied this week after central bank guidance suggested potential rate easing next year, recovering from a two-month low against the euro. The bank maintained its 6.5% policy rate while lowering the 2026 inflation forecast, supporting the currency's year-to-date gains of over 6%. Poland's zloty remained stable despite weaker-than-expected November retail sales, reflecting confidence in the broader economic outlook. Other Central European currencies showed mixed movements, regional stock indices posted modest changes, and government bond yields mostly fell. Analysts suggest domestic data may have limited impact on currency and rate expectations.
Hungary's forint stabilized this week, consolidating its gains for the year after the central bank signaled a potential easing of interest rates next year. The currency had briefly hit two-month lows against the euro following the bank's dovish stance last week. At mid-morning, the forint was trading around 386.65 per euro, having recovered from the 390 mark after the central bank indicated that a restart of interest rate cuts could be considered next year following an extended pause. Advertisement
Economists at Erste Group noted that although the policy rate was kept unchanged at 6.5%, a dovish bias was increasingly evident. The Hungarian central bank had maintained a tight policy stance but lowered its 2026 inflation forecast, signaling that future easing might be possible. Despite the cautious outlook, the forint remains among the top-performing Central European currencies, rising more than 6% against the euro this year, supported by the European Union's joint-highest benchmark rate.
Meanwhile, Poland's zloty remained largely unaffected, trading around 4.2 per euro despite retail sales data for November coming in slightly below market expectations. Bank Millennium analysts highlighted that domestic economic data is likely to have a limited effect on the currency, as expectations regarding the broader economic outlook and interest rates remain stable.
Other Central European currencies showed mixed movements. The Czech crown was slightly lower, while the Romanian leu and Serbian dinar saw minor gains and losses, respectively. Regional stock markets posted modest changes, with Prague, Warsaw, and Bucharest indices recording slight upticks, while Budapest saw a negligible decline. In bond markets, yields on Polish and Czech government securities mostly fell, reflecting adjustments to interest rate expectations. Forward rate agreements also indicated modest shifts in short-term interbank lending rates across the region.
Source Reuters
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