EMEA FX Talking: External headwinds up against local stories
The desk maintains a cautiously optimistic view on EMEA FX currencies, suggesting they may remain insulated from external pressures like rising US Treasury yields, particularly due to strong domestic fundamentals and light foreign positioning. Per the full note , local rate hikes and favorable GDP metrics could offset any bearish sentiment driven by geopolitical tensions. Current trends show the zloty, for instance, has already become sensitive to movements in the EUR/USD pair. As we navigate the forthcoming weeks without key economic events, the focus will be on how these currencies respond to external shocks.
What the desk is arguing
The desk underscores that many EMEA currencies face external pressures from higher US Treasury yields and a strengthening dollar. Domestic stories, however, lend a more promising narrative, suggesting that local rate hikes and light foreign positioning can provide some insulation against global bond market headwinds, as noted in the research from ING.
For instance, while the EUR/PLN has recently experienced volatility driven by market sentiment, upcoming domestic fundamentals and the National Bank of Poland's potential rate hikes could bolster the zloty. The balance of risks is shifting slightly less favorably, particularly with uncertainties regarding future NBP rate decisions.
Where it sits in our coverage
Our current consensus estimates for EUR/USD show a median target of 1.1600 with a range of 1.1200-1.2000 for Dec-26. Firms like rabobank and nomura forecast targets of 1.1800 and 1.2000, respectively.
This perspective aligns with broader market sentiment, as seen by strong consensus among firms, although some, like tmgm, are more conservatively positioned at 1.1450. Our bias is towards the upper end of the current spread, suggesting a slightly more bullish outlook.
How other firms see it
Several firms echo our view, with rabobank and mizuho aligning on their EUR forecasts towards 1.1700 and 1.1600, respectively. Conversely, firms like socgen hold a broader range with targets of up to 1.2000.
Additionally, the performance of the EUR/USD is closely linked to the trajectory of the ECB's rate path, which will have significant implications for EMEA currencies including the zloty and forint, especially under changing geopolitical conditions.
01EMEA currencies show resilience against external financial pressures.
02Local rate hikes could protect against US Treasury yield influences.
03The zloty's performance increasingly reflects shifts in the EUR/USD exchange rate.
04Geopolitical tensions remain a concern but are balanced by strong domestic fundamentals.
Market implications
Traders should keep an eye on the EUR/PLN pair, particularly how it might react to shifts in the EUR/USD market. The consensus target of 1.1700 for EUR/USD suggests that any upward momentum could influence EMEA currencies positively.
Risks to this view
A deviation from expected NBP rate hikes or significantly adverse geopolitical developments could drive EMEA currencies lower than anticipated, reversing some of the positive sentiment currently held by traders.
Articles EMEA FX Talking: External headwinds up against local stories Published 11:47 FX Talking Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Like many emerging market currencies, those in the EMEA region have been hit by higher US Treasury yields and the stronger dollar. Yet the domestic stories look constructive for many, and a combination of some local rate hikes as well as light foreign positioning (ex Hungary) can insulate these currencies from the global bond market sell-off Rafal Benecki , Peter Virovacz , David Havrlant , Mateusz Sutowicz , Dmitry Dolgin , Muhammet Mercan and Chris Turner Light foreign positioning and some local rate hikes can keep EMEA currencies relatively insulated EUR/PLN: Zloty swings with market sentiment Spot One month bias 1M 3M 6M 12M EUR/PLN 4.3877 Mildly Bearish 4.36 4.35 4.33 4.29 EUR/PLN has moved towards 4.40 after trading around the 4.30 level during summer. With market sentiment deteriorating amid geopolitical tensions in Iran, France and Russia, the coming weeks could challenge the zloty.
PLN has recently strengthened its correlation with EUR/USD, so the dollar’s future moves will be the key driver in the currency’s performance, while domestic factors are likely to take a back seat. We retain a broadly positive stance on the zloty in the medium term due to solid GDP momentum and persistent outperformance. However, the balance of risks has become less favourable; the National Bank of Poland may deliver fewer hikes than priced, and a hot budget debate could reveal vulnerabilities.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts EUR/HUF: A credibility boost is in the making for the forint Spot One month bias 1M 3M 6M 12M EUR/HUF 364.89 Bearish 360.00 355.00 360.00 362.00 While EUR/HUF has shown some volatility recently, the swings have been far more moderate than we used to see. This reflects general positioning and the euro adoption story. We think an idiosyncratic shock is coming with the 2027 budget and the mid-term fiscal consolidation plan.
If the government delivers a credible plan, as we expect, and announces official talks on joining ERM II, this could provide a credibility boost to the forint. A significant drop in the risk premium and some insulation from geopolitical market turbulence could take EUR/HUF down to the 350-355 area over the next month. This would, however, reopen the door to a National Bank of Hungary easing cycle starting in December, putting the HUF on a mild depreciation path over the following 12 months.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts EUR/CZK: Braving the turbulence Spot One month bias 1M 3M 6M 12M EUR/CZK 24.39 Neutral 24.40 24.40 24.35 24.30 The Czech Republic has also been affected by the global bond yield rally, with the turmoil applying depreciation pressure on the koruna. Inflation is set to increase on the back of rallying import prices and second-round effects of the oil price shock starting to bite. We believe that equilibrium interest rates are higher than generally assumed, since the cost of capital must adjust to a world of protracted conflict and increased resource scarcity.
A higher base rate is warranted to prevent the koruna from weakening further, which would exacerbate domestic price pressures. That said, the ECB may turn more hesitant despite elevated inflation, as concerns over French fiscal issues rekindle fears of another euro crisis. In turn, the real interest rate differential should help the koruna withstand the turmoil and gradually appreciate once things have calmed down.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts EUR/RON: Rating downgrade avoided, RON still vulnerable Spot One month bias 1M 3M 6M 12M EUR/RON 5.3383 Neutral 5.35 5.35 5.40 5.45 EUR/RON had its second major move of the year, climbing from 5.28 to 5.35, which looks to be the near-term level. Official interventions have likely moderated the impact of significant outflow pressures through both September and so far in October – with the fear of rating downgrades and the protracted political instability as key drivers. While the rating remained in place, the political arena is yet to find its consensus.
The key positive element supporting the credit story remains the budget deficit, which stood at 2.89% of GDP as of August 2026 (vs 4.50% in August last year). A tighter liquidity management has recently led FX implied yields to the highest levels since May 2025, although funding pressures have diminished from their early October peak. We expect the pair to remain around its current levels by year-end and close next year near 5.45.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts EUR/RSD: RSD stable ahead of parliamentary elections Spot One month bias 1M 3M 6M 12M EUR/RSD 117.42 Neutral 117.40 117.40 117.30 117.30 EUR/RSD has remained relatively flat in the range of 117.3–117.5. Yet again, the US Treasury's Office of Foreign Assets Control (OFAC) has extended the operating waiver for Serbia's NIS refinery until 30 October. The NIS ownership issue is yet to be resolved.
Snap parliamentary elections have been called for 25 October, with President Aleksandar Vucic resigning in order to pursue premiership. The fiscal deficit has recently been revised higher, from 3.0% to 3.5% of GDP in 2026, mainly reflecting higher social expenditure. At its October meeting, the National Bank of Serbia kept the key rate in place at 5.75%, continuing to highlight inflation uncertainty.
Between January and August, the Bank sold €407m to keep the pair stable. We expect the pair to remain around the current levels ahead. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/UAH: NBU efforts to protect the UAH Spot One month bias 1M 3M 6M 12M USD/UAH 44.92 Neutral 45.00 45.20 45.30 45.50 The hryvnia remained under pressure as the dollar strengthened, partly due to renewed Middle East tensions.
Consequently, USD/UAH temporarily broke above 45.0, reaching its highest level on record. Hryvnia depreciation could have been sharper, but National Bank of Ukraine action provided support. In September, the central bank raised rates by 50bp to 16.0% and maintained sizeable FX interventions, with the four-week average near record highs.
The outlook for the hryvnia appears cloudy as the macroeconomic environment remains challenging – particularly as the ongoing war with Russia poses an increasing threat to the Ukrainian economy. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/KZT: Growing state FX sales backlog to boost KZT resilience Spot One month bias 1M 3M 6M 12M USD/KZT 452.04 Neutral 455.00 450.00 440.00 465.00 The tenge gained 5% against the US dollar in September, driven mainly by private capital inflows, particularly continued non-resident demand for KZT government bonds. Combined net FX sales by the state oil fund (NFRK) and National Bank of Kazakhstan fell to zero in September, compared with $1.0–1.3bn per month in 1H26.
As NFRK sales have remained below fiscal financing needs since mid-2026, an estimated $1.0–1.5bn backlog of FX sales has accumulated. After gaining 25% YoY against USD, the tenge has limited upside, particularly amid global risk aversion and regional geopolitical uncertainty. At the same time, Kazakhstan’s high real rates should continue to attract carry-trade inflows, while the eventual release of the state FX sales backlog could ensure KZT resilience if market sentiment deteriorates.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/UZS: Still waiting for gold exports to catch up Spot One month bias 1M 3M 6M 12M USD/UZS 11898.00 Bearish 11650.00 11500.00 11600.00 11700.00 After appreciating 1% against the US dollar in August, the soum was broadly flat in September and early October. This was slightly weaker than we expected, but still resilient given the global dollar rally and lower gold prices. Gold exports remain a key variable for Uzbekistan’s FX market.
There were no exports in August, and gold was exported only in April and July this year. Year-to-date volumes stand at just 18 mt, implying a substantial backlog compared with 85 mt in FY25 and the historical annual range of 80–120 mt. Like Kazakhstan, Uzbekistan offers high real rates and is likely to continue doing so despite a potential monetary policy easing.
As inflation has stabilised at 6.2–6.4% YoY, we see some room for a cautious cut from the current 14.00% policy rate before the end of the year. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/TRY: Rate cut expectations build as inflation eases Spot One month bias 1M 3M 6M 12M USD/TRY 49.34 Bullish 49.75 51.50 54.30 59.80 Fund volatility has not affected the dollarisation ratio. Net outflows in lira-denominated funds turned TRY625bn between the end of August and 6 October, excluding suspended funds.
Meanwhile, outflows from FX-linked fund assets totalled $2.2bn, while higher TRY deposits and repo balances suggest dollarisation remains contained. September’s CPI came in below consensus, supported by favourable food and transport. Annual CPI fell to 29.7% from 31.5% in August.
Seasonally adjusted CPI, a key indicator closely monitored by the Central Bank of Turkey, slowed to 1.6% month-on-month from 2.2% in August, marking one of the lowest readings seen in recent years. This backdrop increases the likelihood of a shift toward policy rate cuts. The recent investment fund disruption is likely to raise downside risks to activity.
Given September’s CPI and weak domestic demand, we expect two 100bp cuts in October and December. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/ZAR: A resilient performance from the rand Spot One month bias 1M 3M 6M 12M USD/ZAR 16.51 Mildly Bearish 16.50 16.50 16.25 16.00 The high-yield rand has been one of the better EM performers during the sell-off over the last month. Its fiscal metrics are not particularly great, (5% budget deficit, 80% debt to GDP), but the coalition government looks to be taking things in the right direction; a primary budget surplus is helpful here.
The South African Reserve Bank is helping out too, having hiked 25bp in September to 7.25%. It is threatening to hike rates again on a baseline view that core central banks hike another 50bp. A difficult external environment suggests USD/ZAR may need to trade in a 16.00-16.60 range for the next three to six months.
As 2027 progresses, however, the case for sub-16.00 levels builds. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/ILS: Israel’s higher credit rating provides a buffer Spot One month bias 1M 3M 6M 12M USD/ILS 3.0713 Neutral 3.05 3.05 3.05 3.05 Israel’s high-quality credit rating (A-) has provided a buffer to the shekel during this debt crisis. That largely stems from Israel’s strong external investment position and relatively large domestic capital market.
Additionally, the debt sell-off has yet to unhinge the US tech story – of which the shekel is a beneficiary. In September, the Bank of Israel cut rates to 3.25%, citing low inflation. Markets currently price further aggressive cuts to the 2.00% area, which seems excessive.
The BoI might prefer to save those rate cuts for when the dollar is broadly softer – maybe in 2Q27 – and when USD/ILS is threatening to run away sub-3.00. Longer term, the trade-weighted ILS is very firm, and we suspect Israeli authorities will struggle to tolerate much further strength. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts FX Talking Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Rafal Benecki Chief Economist, Poland Peter Virovacz Chief Economist, Hungary David Havrlant Chief Economist, Czech Republic Mateusz Sutowicz Senior Economist, Poland Dmitry Dolgin Chief Economist, CIS Muhammet Mercan Chief Economist, Turkey Chris Turner Global Head of Markets and Regional Head of Research for UK & CEE
fxstreet.com
EUR/USD Price Forecast: Gets some relief from Russia-Ukraine energy ceasefire
De-escalation in energy supplies reduces euro-zone recession risk premium, supporting EUR/USD upside near-term.