Putin-Russia has further escalated the Ukraine conflict. Hence, energy is the key focus ahead of winter. Despite signals for an imminent downturn central banks remain hawkish. In CEE, there is some divergence in rates policy with stability in CZ and a bold hike in HU upcoming.
Besides the ongoing war in Europe (the Russian president called up reserves today), an energy crisis and a looming recession, the newsflow has recently also intensified on the rule-of-law dispute between Budapest and Brussels. Hungary is more committed to implement reforms and the Commission tries to find a way out but risks remain that it is too little too late. While we think a compromise is still possible, the HUF remains volatile and acts sensitive to the newsflow. Volatility has remained elevated on global markets too. EUR/USD keeps oscillating around parity, also awaiting today's FOMC meeting. In the meantime we have updated our forecasts to the downside. In light of euro recession risks materializing, EUR/USD is more likely to close the year below rather than above parity.
This issue features: