ING Prefers HUF as CEE FX Opens Cautiously

Central and Eastern European currencies started the week on a defensive footing. ING (ING GROEP NV) reiterated its preference for the Hungarian forint (HUF) over the Polish zloty (PLN) and Czech koruna (CZK). The bank’s note arrives as regional markets weigh a mixed external backdrop against local macro developments that continue to shape relative value.

The cautious open reflects lingering uncertainty about the global growth outlook and rate differentials within the CEE-3. ING analysts see HUF as the better positioned currency over the near term. This preference is grounded in Hungary’s central bank (MNB) policy path and carry dynamics, not a broad risk-on call for the region.

HUF Carry Advantage vs. PLN and CZK

The simple read is that HUF has outperformed its peers on the back of higher base rates and a central bank that has maintained a restrictive stance longer than the National Bank of Poland (NBP) or the Czech National Bank (CNB) . Carry strategies have favoured the forint, and that trend has not broken.

The better market read involves the rates cycle gap. The MNB left its base rate unchanged at 6.50% at the December meeting, pushing back against market expectations of earlier cuts. The NBP has signalled a potential easing cycle starting later this quarter. The CNB has already delivered three 50-basis-point cuts since December 2023. That divergence in policy rates creates a yield advantage for HUF that is not matched by the other two currencies.

ING also points to improving external balances in Hungary. The current account surplus has widened as energy import costs fell, reducing the structural vulnerability that weighed on the forint during the 2022 energy crisis. That shift lowers the risk premium embedded in HUF versus PLN and CZK, both of which face larger trade deficits relative to GDP.

The Two Risks to the HUF Trade

The preference for HUF is not an unconditional buy signal. The setup is vulnerable to two factors: a global risk-off shock and a MNB policy pivot earlier than guided.

If a sharp spike in risk aversion materialises, CEE currencies trade as a block. The forint would not decouple from the zloty or koruna in a selloff triggered by, say, a US recession scare or a sudden escalation in the Ukraine-Russia conflict. ING’s note assumes a stable-to-supportive global risk environment through the first quarter.

More critically, the rate differential narrows if the MNB surprises with a cut before the NBP or CNB moves again. The central bank’s own forward guidance points to a sustained pause. Hungarian inflation data for January, due later this month, could show a sharper-than-expected deceleration, putting pressure on the MNB to deliver early easing. That would compress the HUF carry advantage and likely trigger a repositioning.

EUR/PLN and EUR/CZK: Alternative Plays

For traders not convinced by the HUF trade, ING’s analysis offers a framework for the other two pairs. EUR/PLN has drifted above 4.30 in recent sessions, a level the NBP has historically viewed as a threshold for verbal intervention. The pair may struggle to push higher unless the zloty faces a discrete negative catalyst such as a ratings action or a renewed judicial-rule-of-law dispute with the European Commission.

EUR/CZK has risen after the CNB’s aggressive cuts. The koruna is now the weakest CEE-3 currency on a trade-weighted basis this quarter. That depreciation is a deliberate consequence of policy easing, and the CNB has shown no discomfort with a weaker exchange rate. For traders, that means the koruna path is a play on the Czech rates cycle, not on a turn in external risk appetite.

Next Catalysts: Hungarian IP and Polish CPI

Wednesday’s Hungarian industrial production data and Friday’s Polish CPI flash estimate are the next local catalysts. A weak Hungarian IP print could accelerate calls for MNB easing. A firm Polish CPI number would push back NBP cut expectations, potentially narrowing the HUF-PLN rate gap. Either outcome would challenge the current relative-value consensus.

Tracking COT positioning will also matter. Hedge funds have built a net long HUF position over the past two weeks, per weekly COT data. A reversal in those positions would be an early signal that the trade is getting crowded.

ING's Alpha Score stands at 75/100 (Strong label, Financial Services sector). For traders looking at CEE FX through a bank stock lens, ING’s regional exposure makes it a proxy for the carry trade theme. For direct currency plays, the EUR/USD profile and forex correlation matrix offer additional context for pair dynamics.