EUR/PLN: Zloty supported by interest hike expectations
Despite the turmoil in the Middle East, the EUR/PLN exchange rate is trading within a narrow range of 4.23–4.30. The relatively low volatility of the zloty reflects limited sensitivity of Poland’s GDP and energy supply to the US-Iran war and renewed rate hikes expectation
Although we do not expect any interest rate changes in 2026, it is likely that, until the beginning of July (important Monetary Policy Council meeting due to the new macro projections), markets will not fully price them out. As a result, these expectations will act as a shield against risk-off.
We remain neutral on the zloty. Domestic fundamentals are still supportive of the Polish currency. GDP should outperform the rest of CEE and the high public investment agenda is starting. On 8 May, S&P maintained its ratings and outlook. Current risks are linked to geopolitical factors.
EUR/HUF: The forint has found a sweet spot for now
Investors have become extremely optimistic about HUF since the election results opened the door to a pro-EU political transition. However, it seems that the market has finally found a sweet spot for the forint, at least in the short term.
The National Bank of Hungary reduced the interest rate on FX swaps providing euro liquidity by 50bp to 5.25%. This has put further strain on the markets, creating a path towards an earlier-than-expected cut in the base rate, which contrasts with our ‘on-hold’ forecast.
Yet, positive headlines related to EU funds, the restoration of checks and balances, and more news on budget consolidation and euro adoption mean that we wouldn’t rule out EUR/HUF testing and breaking through 350 in the next 12 months.
EUR/CZK: Interest rate and growth differentials favour the koruna
The koruna is set to carry on in its strengthening trend and erase previous limited losses before the summer ends. The Czech economy should continue to expand despite pressures induced by elevated energy prices and Hormuz blockade.
The Czech National Bank is expected to keep rates steady – even as inflation gains momentum – so as not to undermine economic activity. We think the Czech economy will likely bend but not break.
The Czech real interest rate is set to remain positive, which is in stark contrast to the eurozone’s real interest rate, which slipped into the negative territory in March already. With a rates differential of above 1ppt in nominal and almost 2ppt in real terms, we remain positive on the koruna.
EUR/RSD: No major changes in sight
EUR/RSD traded mostly sideways again this month, staying within a narrow 117.33–117.49 range. An uncertain outcome related to the NIS refinery has persisted – negotiations reportedly continue. The revised proposal from Hungary’s Mol Group failed to meet the Serbian authorities’ expectations.
Solid investment activity related to the EXPO 2027 event should continue to support growth this year and improve the productive potential. Meanwhile, double-digit wage growth should continue to benefit private consumption.
The National Bank of Serbia (NBS) held the key rate unchanged at 5.75% at its May meeting – continuing to highlight stagflationary pressures stemming from the ongoing Middle East tensions. FX stability is likely to remain a key focus ahead. In January-April, the NBS sold EUR1,205m to keep the pair stable.
USD/UAH: National Bank of Ukraine’s efforts to help the hryvnia
The USD/UAH exchange rate has reversed from the record highs reached after the US-Iran conflict triggered a risk-off sentiment. On the one hand, the global FX environment has become more favourable; on the other hand, the efforts of the central bank have helped to strengthen the hryvnia.
In April, Ukraine’s international reserves decreased further by 7.3%, mainly due to FX interventions and, to a lesser extent, FX debt repayments (to the IMF). Nevertheless, despite this decline, international reserves, according to the NBU, remain sufficient to maintain FX market stability.
The macro environment remains challenging due to the ongoing war. However, the latest update of the NBU’s macroeconomic forecast shows that GDP growth in Ukraine should accelerate next year (to 2.8%, from 1.3% in 2026), while inflation is expected to decline further.
USD/KZT: Portfolio inflows give an extra lift
The tenge keeps strengthening, having appreciated 5% since the renewed tensions in the Middle East, even as the oil price has largely stabilised last month after the initial spike.
KZT’s reliance on portfolio inflows is growing, as net inflow reached $0.4 bn in 1Q26, double the 2025 quarterly average, while the recently announced Euroclear connection and debt issuance plans should give a further boost.
Kazakhstan’s cautious monetary policy and high real interest rates should be supportive of continued portfolio flows, helping to offset the persistent current account deficit and a potential cut in the FX sales from the sovereign fund.
USD/UZS: Stable despite the extended halt in gold exports
The soum continues to show stability, despite the double pressure on the trade balance from higher oil imports and a halt in gold exports since October 2025.
Similar to Kazakhstan, Uzbekistan’s FX market is seeing increased support from net portfolio inflows, which increased by $1.3bn to $4.4bn in 2025, and the capital account is likely to be supported by the ongoing privatization programme.
High real interest rates and the impending restart of gold exports later in the year reinforce our constructive view on the Uzbekistani soum for the near term. In the longer run, addressing elevated CPI and the twin deficits will be key.
USD/TRY: An appropriate adjustment in the pace of TRY depreciation
Reserve dynamics, which came under pressure in March due to foreign outflows, have stabilised since early April, supported by prospects of de-escalation and a ceasefire. However, an outright rate hike remains possible should reserve pressures intensify or retail demand strengthen. The CBT has also recalibrated and slightly accelerated the pace of lira depreciation.
This adjustment appears appropriate given the renewed strengthening in the real effective exchange rate since the start of the year. At its April MPC meeting, the bank remained silent, likely reflecting a partial recovery in reserves alongside concerns about moderating growth. The decision indicates a preference to preserve policy flexibility under evolving geopolitical conditions.
In the near term, the CBT is expected to maintain a wait-and-see approach before deciding whether to reduce the effective cost of funding toward the policy rate. However, rising energy prices, moderating growth prospects, and persistent dollarisation risks create a challenging environment, limiting the central bank’s room to implement any meaningful rate cuts.
USD/ZAR: South Africa Reserve Bank easing cycle curtailed
USD/ZAR is consolidating alongside most EMFX as markets still try to price an early end to hostilities in Iran. Portfolio flows into South Africa – especially into the bond market – correlate well with global EM flows. Notably the latter have held up well. However, the SA bond story is not as attractive as it was, since the market now prices 100bp of hikes in the 6.75% policy rate.
The SARB seems confident that CPI can remain in its 3% +/- 1% target. But a severe scenario could see 6% CPI and the policy rate hiked to 8%. El Nino in 2H26 also poses upside risks to CPI.
Growth is seen in the 1-2% range and based on the ZAR’s carry and our global dollar view, we’re bearish USD/ZAR into 2027.
USD/ILS: Don’t chase USD/ILS lower
USD/ILS continues to trade well below 3.00. The global equity rally and low risk premia is being blamed for the shekel strength – though as we have said before, tech capital raising may be a driving factor here. The Bank of Israel notes that domestic institutional investors were the big USD/ILS sellers in the first quarter ($5bn), after having sold $13bn in 4Q25.
Normally the BoI would have intervened a lot by now, but that has not been the case – perhaps limited by Washington.
But what seems clear is that the BoI will react to ILS strength at some point. That is why the market has priced in nearly 100bp of BoI rate cuts over the next six months.
Source: ING
www.hellenicshippingnews.com