EMEA FX Outlook 2027: Restrictive policy remains the key FX anchor
The desk projects that EMEA FX will remain underpinned by a robust restrictive monetary policy, with a focus on carry opportunities from currencies like the Hungarian forint (HUF) and South African rand (ZAR). Per the full note from the source, these currencies are expected to benefit from solid external balances and continued EU fund inflows, while performance divergence is anticipated across the region due to high global yields and geopolitical risks. Thus far, targets for the EUR/USD, GBP/USD, and USD/JPY pairs reflect varying market sentiment, with consensus predicting moderate gains for the Euro but some caution for the Polish zloty (PLN). Moving forward, traders should closely monitor developments in central bank policies and external economic conditions.
What the desk is arguing
The desk argues that EMEA FX's stability is primarily driven by ongoing restrictive monetary policies and attractive carry, especially for the HUF, ZAR, and TRY. This view is supported by the fact that the National Bank of Hungary is expected to keep rates at 5.50% for the next year, suggesting a maintaining of the HUF within its 350-370 EUR/HUF range.
However, a divergence is expected in performance across EMEA currencies, particularly with the zloty potentially facing headwinds from narrower rate differentials and fiscal concerns. The source highlights that fiscal risks and geopolitical uncertainties will likely weigh more heavily on the PLN than on the stronger currencies in this diverse landscape.
Where it sits in our coverage
Currently, the consensus target for EUR/USD sits at 1.1400, with a range spanning from 1.1000 to 1.2000 as various firms weigh in. Notable targets include: - Investec: Dec26 1.1700 - RBC: Dec26 1.2000 - Commerzbank: Dec26 1.2200
The desk's perspective that EMEA currencies will retain strength aligns broadly with the upper ends of consensus targets across the board. Notably, firms such as BNP Paribas and Nomura project similar upward potential for EUR/USD.
How other firms see it
Aligned firms, such as CIBC, Investec, and RBC, all share a consensus view favoring a moderate appreciation of the euro against the dollar. Conversely, firms like Mizuho project more conservative targets, suggesting a bearish sentiment could be emerging for specific currencies, particularly the PLN.
The divergence in views on the PLN emphasizes its vulnerability, especially amidst ongoing fiscal concerns against a backdrop of central bank decisions across the region. Furthermore, the handling of the EUR/USD trajectory remains critical, especially as this mirrors trends set by the ECB's rate path in the coming months.
01EMEA FX outlook supported by restrictive policy, centering on HUF, ZAR, and TRY.
02Divergence in currency performance expected due to macroeconomic factors.
03HUF projected to maintain strength amidst supportive central bank rates.
04Polish zloty facing challenges from fiscal and geopolitical uncertainties.
Market implications
Watch the HUF closely as it approaches the 370 EUR/HUF mark, which serves as a critical resistance level. Additionally, observe the consensus targets for the EUR/USD to gauge overall market sentiment and positioning.
Risks to this view
A sudden shift in monetary policy from the ECB or a worsening geopolitical situation could significantly alter the optimistic outlook for EMEA currencies. Specifically, a potential dovish turn could undermine the carry trades benefiting HUF and ZAR.
Articles EMEA FX Outlook 2027: Restrictive policy remains the key FX anchor Published 18:04 FX Translate Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download EMEA FX should remain supported by restrictive policy and attractive carry, but performance will increasingly diverge. We favour HUF, ZAR and TRY, while CZK remains supported and PLN faces headwinds. Global yields, energy prices, fiscal risks and geopolitics remain key drivers Chris Turner , Rafal Benecki , Adam Antoniak , Mateusz Sutowicz , Peter Virovacz , David Havrlant , Dmitry Dolgin , Valentin Tataru , Stefan Posea , Muhammet Mercan and Frantisek Taborsky Executive summary Central banks across EMEA remain focused on currency stability as inflation, fiscal risks and geopolitics keep the external environment challenging.
Restrictive monetary policy and attractive carry support several currencies, particularly the forint, rand and lira, while solid external balances and EU inflows provide additional buffers. At the same time, high global yields, energy price risks, fiscal concerns and geopolitical uncertainty should drive greater differentiation across the region. The CEE3 region, comprising the Czech Republic, Hungary and Poland, should remain relatively well supported by restrictive monetary policy, although the outlook is becoming more differentiated.
The Hungarian forint remains our preferred Central European currency, with the National Bank of Hungary expected to keep rates at 5.50% for the next 9-12 months, while fiscal consolidation, EU-fund inflows and an improving external balance should keep the forint biased towards the stronger end of its 350-370 EUR/HUF range. The Czech koruna should also benefit from positive nominal and real rate differentials after the Czech National Bank raised rates to 4%, although weaker growth should prevent a renewed hiking cycle. By contrast, we have turned mildly negative on the Polish zloty.
Narrower rate differentials, fiscal concerns and rising political and rating risks should limit PLN performance, despite strong economic growth and sizeable EU inflows. Overall, global yields, energy prices and geopolitics are likely to remain important drivers across the region. Real policy rate (%) Source: Macrobond "> Source: Macrobond In the managed currency segment in EMEA, the Romanian leu should see greater stability after the volatility of the past two years.
Fiscal consolidation, diminishing rating risks and lower government borrowing needs have improved Romania’s fundamental story, while weak growth and falling inflation should allow the National Bank of Romania to start cutting rates next year. However, the central bank appears more willing to tolerate FX volatility than in the past, suggesting that stability around current EUR/RON levels should not be mistaken for a return to the exceptionally tight management seen historically. Meanwhile, the Central Bank of Turkey should continue its gradual easing cycle while maintaining sufficiently attractive real rates to contain dollarisation and support reserves.
Although disinflation has been delayed and inflation risks remain tilted to the upside, renewed reserve accumulation and contained FX demand suggest the current exchange-rate regime remains firmly in place. We therefore expect the lira to continue offering attractive carry despite ongoing nominal depreciation. On the periphery of the EMEA region, South Africa’s rand should remain well supported by a hawkish central bank and attractive carry.
With inflation pressures elevated, the South African Reserve Bank is keeping policy firmly restrictive, while relatively low volatility has reinforced the rand’s appeal. Progress on energy and freight reforms could provide an additional tailwind in 2027, particularly if the external environment improves, leaving the rand among the stronger performers in our EMEA forecast. Israel’s shekel faces a more balanced outlook.
The Bank of Israel has responded to low inflation and excessive currency strength with rate cuts and FX intervention, signalling limited appetite for further appreciation. Softer US tech performance could also weigh on investment and hedging flows. However, Israel’s persistent current account surplus, strong reserve position and solid credit fundamentals should limit depreciation, while any improvement in geopolitics would provide renewed support.
Currency sections EUR/PLN: Turning negative on the zloty Spot Year ahead bias 4Q26 1Q27 2Q27 3Q27 4Q27 EUR/PLN 4.40 Mildly Bearish 4.39 4.36 4.34 4.33 4.31 We are shifting our view on the zloty from neutral to mildly negative: The latest weakening of the zloty was driven mainly by global factors: a hawkish Fed, high US Treasury yields, a stronger dollar and concerns over French public finances. Rate hikes by both the Fed and the ECB have also narrowed Poland's interest rate advantage, eroding PLN’s carry appeal. Solid fundamentals should nonetheless prevent a disorderly depreciation: Poland remains one of the fastest-growing EU economies, its external position is sound, significant inflows from the Recovery and Resilience Facility (RRF) and the Security Action for Europe (SAFE) defence programme are still ahead, and foreign investors' exposure to Polish bonds is light.
Moreover, the National Bank of Poland (NBP) may tighten monetary policy in early 2027. However, many of these factors are already priced in. Risks to the zloty are primarily domestic and geopolitical: Several downside risks for PLN have intensified.
Public finances remain the key vulnerability: the fiscal deficit is the largest in the EU, public debt is rising and approaching statutory thresholds, and no meaningful consolidation is planned before the 2027 parliamentary elections. Tense cohabitation between the government and the President limits the scope for fiscal repair, while the escalating dispute over the Constitutional Tribunal adds to the risk premium. Rating pressure is mounting, with one rating downgrade already delivered this year and the second outlook revised to negative.
Geopolitically, high energy prices linked to the Middle East conflict, escalation of the war in Ukraine and hybrid attacks on Europe remain the main threats . We expect EUR/PLN to remain in a 4.32-4.45 range over the coming months: In the near term, risks are skewed towards a weaker zloty, as a negative rating action or an escalation of domestic political tensions could push the pair towards the upper bound. A gradual recovery of the zloty in 2027 would require sustainably lower energy prices, lower global yields, a firmer stance from the NBP, and continued EU-fund inflows.
Even then, loose fiscal policy ahead of the elections makes a return to the stronger levels seen in the first half of this year unlikely. EUR/HUF: Rangebound, with a stronger-forint bias Spot Year ahead bias 4Q26 1Q27 2Q27 3Q27 4Q27 EUR/HUF 364.00 Neutral 360.00 365.00 365.00 360.00 360.00 The forint remains a prisoner of global forces: With the fiscal consolidation plan presented and preparations for the EU’s Exchange Rate Mechanism (ERM) II talks underway, there is no longer a single domestic event that can be circled as the next major market trigger. Instead, energy prices, geopolitics and global risk appetite are likely to dominate.
The forint also remains an important part of the National Bank of Hungary’s (NBH) inflation strategy, especially given the high degree of exchange rate pass-through. In this volatile environment, we expect rates to remain on hold for the next 9–12 months at 5.50%. Inflation may provide room for easing, but that room remains behind a closed door.
Only a sustained and structural improvement in the risk environment is likely to provide the key. EUR/HUF should remain contained within a 350-370 range: At the stronger end, 350 represents a natural line in the sand. A significant decline in Hungary’s risk premium could take the pair towards this level, but the accompanying dovish repricing would make a sustained break lower difficult.
Markets are likely to bring forward expectations of rate cuts, reflecting the Monetary Council’s underlying dovish bias, a view we share. At the weaker end, the central bank’s readiness to use the exchange rate channel should limit any disorderly sell-off. A non-linear move towards or beyond 370 could trigger verbal intervention and, if necessary, direct market action.
We see an actual policy rate hike as a last resort, with the central bank likely to reach for other interest rate tools, including the FX swap rate, before touching the base rate. Credible intervention does not always require the central bank to pull the trigger; if markets believe the threat, they will do much of the heavy lifting themselves. Domestic factors should keep the forint on the stronger side: Without a singular defining event, markets will closely monitor monthly budget execution, inflation developments, and progress in fiscal consolidation.
Actual EU-fund inflows, an expected return of the current account to surplus and the possibility of positive sovereign rating actions should keep the forint closer to the stronger end of its range. A gradual grind lower in EUR/HUF could even bring 350 into view at moments of peak optimism. However, such strength would probably be followed by monetary easing, preventing a lasting appreciation beyond that level.
We therefore see the forint primarily as a tactical market within a longer-term constructive story, supported by Hungary’s potential path towards ERM II entry at the start of 2029. EUR/CZK: Koruna holds up well in tough times Spot Year ahead bias 4Q26 1Q27 2Q27 3Q27 4Q27 EUR/CZK 24.38 Neutral 24.30 24.26 24.22 24.19 24.17 This is not a hiking cycle: The Czech National Bank (CNB) increased the policy rate to 4% in two steps yet stressed repeatedly that this doesn’t represent the onset of another hiking cycle. Moreover, the tone of the latest press conferences was relatively dovish, while the meeting with analysts revealed that the country’s dwindling economic performance is a growing concern for some board members.
We saw few pushbacks against the idea that the equilibrium rate is likely higher than generally assumed. In turn, it seems we’re in the process of searching for the right spot in a world of growing uncertainty. A weaker koruna contributing to rising import prices will be one of the key factors that the CNB will watch when it comes to maintaining price stability over the next year, but interest rates should remain the policy tool of choice.
Stable rates are the most likely outcome if our forecast for next year’s average inflation of 3.1% is right. Constrained consumers: The second-round effects linked to the protracted Hormuz shock have started to materialise and will be felt in renewed annual increases in regulated prices and food prices. Large distributors are beginning to announce increases in energy and heating prices, while higher water charges will also play their part.
With food prices also set to rise soon, there is little chance for any relaxation of the monetary policy stance, unless household consumption and economic performance prove weaker than expected. Indeed, disappointing real GDP figures could put a lid on a potential hiking spree. With real wage growth softening materially over the next year and borrowing costs rising, many households would be forced to reconsider their spending habits, especially when it comes to discretionary spending.
Koruna enjoys rate support: Still, we will continue to see a positive interest rate differential with the ECB in both nominal and real terms, which makes the koruna attractive. The domestic currency is set to remain stable in times of elevated uncertainty, while a gradual strengthening trajectory is likely once the global turmoil shows signs of settling down. Should oil prices recede further and remain lower for longer, we would see fresh wind in koruna’s sails, as this would prepare the ground for the Czech economic expansion to accelerate.
Real convergence would get back on track, and the more pronounced outperformance relative to the eurozone’s real growth would once again work in koruna’s favour. Moreover, the CNB is free to raise rates as it pleases should domestic or imported inflation get out of hand; we have some doubts about whether the ECB has the same room for manoeuvre, as it must, like it or not, keep one eye on French bond yields. EUR/RON: No big changes expected ahead Spot Year ahead bias 4Q26 1Q27 2Q27 3Q27 4Q27 EUR/RON 5.35 Neutral 5.35 5.35 5.40 5.45 5.45 Monetary policy should remain the main near-term anchor for the leu: The National Bank of Romania (NBR) has continued to keep the policy rate at 6.50% throughout 2026, and our baseline remains for 50bp of easing in 2027, pending a smoother disinflation process.
Weak activity and improving headline inflation would justify an early start, but sticky price pressures on the services front, potential episodes of political uncertainty and risk-off global events could delay the easing cycle. In this context, we think that liquidity management will remain an important part of NBR’s balancing act. The liquidity surplus fell sharply through October, from around RON20.8bn to RON4.9bn, supporting tighter money market conditions during the recent period of intense FX pressures.
However, FX-implied yields have since retreated from an early-October peak to more manageable levels, broadly in line with their one-year average. Acute pressure on the currency seems to have eased since mid-October, although it’s not excluded that a smaller liquidity surplus going forward will continue to support monetary transmission and discourage renewed short positioning. The domestic slowdown has yet to translate into a convincing correction of Romania’s external imbalance: Retail sales have been contracting for more than a year, reflecting weaker household demand, fiscal consolidation and elevated inflation.
Nevertheless, the January-September trade deficit remained visibly elevated at 6.3% of GDP in 2026, only marginally narrower than 6.5% in 2025 and 6.7% in 2024 for the same period. The investment cycle has also sustained imports despite weaker consumption. In particular, the final push to complete RRF-funded infrastructure, transport, energy and healthcare projects has generated strong demand for imported machinery, equipment and intermediate inputs.
We think that Romania’s potential growth currently sits at around 2.0%, but productive investment could lift it towards 2.4-2.7% in 2027-2029 through better infrastructure, connectivity and energy availability, which should favour the medium and long-term fundamentals for RON. Our baseline is for further controlled depreciation in 2027, with fiscal credibility, political stability and capital flows as key factors to watch: Romania’s investment-grade rating preservation has provided some relief, but the cautious approach of markets with regards to fiscal implementation and the delivery of a credible medium-term consolidation plan remains in place. In this context, uncertainties over Romania’s capacity to absorb the remaining €6.4bn of RRF funds represents an additional short-term risk.
Delays or lower-than-expected absorption would place greater pressure on domestic and market-based funding. We think that the NBR will continue to maintain a rather firm grip on the currency, discouraging one-sided positioning. We expect EUR/RON to remain around 5.35 by end-2026 and move gradually towards 5.45 by end-2027.
Renewed episodes of political instability, fiscal slippage or weaker RRF absorption could produce a faster depreciation. EUR/RSD: Stability is likely to prevail Spot Year ahead bias 4Q26 1Q27 2Q27 3Q27 4Q27 EUR/RSD 118.00 Neutral 117.50 117.40 117.30 117.30 117.20 Active FX management should remain the main anchor for the dinar: The National Bank of Serbia (NBS) surprised with a 25bp hike to 6.0% at the November meeting, seeking to contain second-round inflation effects from persistently high energy prices, while also leaning against the recent depreciation pressure on the dinar. Our baseline outlook forecasts no further hikes at this stage, and we expect 50bp of rate cuts in 2027 (likely through the second half of the year), taking the policy rate to 5.50% by end-2027.
Nevertheless, we think that the balance tilts more towards upside risks for rates, rather than to the downside. Currency stability has been a key policy feature this year and is likely set to remain an integral part of the policy framework ahead; the NBS sold €475m between January and September, including substantial intervention in September, when it sold €380m as energy-related FX demand increased. In any case, reserves remain comfortable, giving the central bank ample capacity to contain volatility moving forwards.
A stronger domestic economy should support the dinar, although fiscal stimulus and investment-related imports create external and inflationary trade-offs: Serbia’s GDP expanded by 4.0% year-on-year in 3Q26, accelerating from 3.8% in the second quarter and 3.2% in the first. Private consumption, a resilient labour market and the investment programme ahead of EXPO 2027 should continue to support activity ahead. However, the more expansionary fiscal stance, infrastructure spending and the import-intensive nature of the investment cycle could also act as catalysts for slightly stronger price pressures and trade deficits in the near term.
That said, at around 43% of GDP, public debt remains manageable, while Serbia’s macro fundamentals continue to remain robust. We expect EUR/RSD to remain broadly stable around 117.4-117.5 through 2027, although domestic politics and the unresolved NIS transaction present near-term risks: The Student List won the 25 October parliamentary election, ending the previous governing bloc’s longstanding dominance. While the result could support institutional reform and closer EU alignment, uncertainty around the political transition and future policy direction, alongside energy-related FX demand, likely contributed to the dinar’s modest weakening towards 117.6.
Meanwhile, 11 December is the target for completing negotiations under which Hungarian oil group MOL would acquire the Russian-controlled stake in Serbian oil company NIS, although a final purchase agreement and regulatory approvals remain outstanding. With substantial reserves and a demonstrated commitment to FX stability, the NBS should be able to absorb further temporary pressures and keep the currency close to its desired range. USD/UAH: Orderly hryvnia depreciation Spot Year ahead bias 4Q26 1Q27 2Q27 3Q27 4Q27 USD/UAH 45.44 Neutral 45.20 45.30 45.40 45.50 45.50 Gradual UAH depreciation ahead: The hryvnia has weakened to record lows against the US dollar.
Even so, we expect further gradual depreciation. Pressure stems from a firmer dollar on the back of a hawkish Fed and renewed tension in the Middle East as well as intensified Russian attacks on Ukraine's economy. The National Bank of Ukraine (NBU) continues its strategy of "managed flexibility": it tolerates an orderly slide but intervenes heavily in the FX market to prevent disorderly moves.
Monetary policy has turned tighter, with a series of rate hikes since the summer reaching 150bp in total accompanied by guidance that rates will stay high well into 2027, as inflation has turned into double-digit territory recently. FX reserves have declined: External financing remains the key anchor for the hryvnia. However, international reserves have fallen markedly from their record highs earlier in the year, as FX interventions and debt service outpaced inflows.
On one hand, disbursements under the EU's Ukraine Support Loan have lagged behind plans because of delays in
Euro finds temporary support near 1.1066 against US Dollar, outlook remains uncertain