CEE Exchange Rates Report for October 7th – 11th
By: Zoe McLaughlin, The Quinnipiac University Economics Research Team
CEE Currencies Index
Source: DBNomics and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency) and then indexed to 100 at the start of the period.
During the week of October 7 – October 11, all four observed Central European currencies—the Czech koruna (red), Hungarian forint (green), Polish złoty (blue), and Romanian leu (purple)—experienced slight increases in value relative to the United States dollar. The Romanian leu saw the most significant gain, closing the week up 0.79%. The Czech koruna followed closely, with a 0.62% rise, peaking mid-week at 0.77% on October 10. The Hungarian forint ended with a 0.71% increase, while the Polish złoty saw the smallest change, closing the week with a 0.26% rise after hitting a mid-week high of 0.66% on October 10.
CEE Currencies Historical Trends
Source: DBNomics and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency). The center line is a rolling three-month average. The upper and lower boundaries are the average plus and average minus one standard deviation, respectively, for the same three-month period.
After this week, the Czech koruna, Polish złoty, and Romanian leu are now positioned slightly above their respective three-month rolling averages. Notably, the Hungarian forint has surpassed expectations, sitting more than one standard deviation above its three-month rolling average relative to the United States dollar. These upward trends may signal a stronger performance for these currencies heading into the next week.
Additional Reading
For the first time since January 2021, Hungarian inflation has dropped to the central bank's target of 3.0%, down from 3.4% year-over-year. A significant factor behind this decline was a global drop in fuel prices, which decreased by 3.7%. This reduction, while not specific to Hungary, played a key role in the overall inflation slowdown. However, food prices in Hungary continued to rise, showing a 1% increase month-over-month. Additionally, the prices of services fell by 0.8% from August to September 2024, further contributing to the moderation in inflation.
Over the past month, inflation in Czechia increased more than expected, with consumer prices rising by 2.6% year-over-year. Food prices continue to be a major driver of these overall consumer price increases. As a result, the Czech National Bank is likely to slow down or potentially pause its current cycle of interest rate cuts to address the higher-than-forecasted inflation.
Central banks in Poland, Czechia, Hungary, and Romania are all facing challenges that may hinder the ongoing trend of interest rate cuts across the region. In Poland, inflation remains stubbornly high, with year-over-year inflation reaching 4.9% in September, significantly above the central bank's 2.5% target. Czechia is also grappling with rising inflation, driven largely by service costs and household spending. While Hungary has seen some positive inflation data, the forint’s volatility and slower-than-expected GDP growth pose concerns. Romania, on the other hand, has seen strong sales and investment activity but continues to struggle with its budget deficit, complicating its economic outlook.
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