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CEE FX: Goldman Sachs Favour Long PLN When European Election Risk Subsides

CEE FX
  • Goldman Sachs think the CEE FX weakening last week can be explained by the increased Europe-specific risk premium priced on the back of the snap French election.
  • Through these risk-off episodes, PLN and HUF typically underperform the lower-volatility CZK, and they expect this dynamic to continue to play out. Still, given the sensitivity of the NBH in to exchange rate developments, the recent moves may prompt a hawkish response which could support HUF relative to its peers.
  • If and when European election risk becomes less prominent, Goldman Sachs’ favourite long in the region continues to be the Polish Zloty, which is supported by the recent improvements in Poland’s external balances and its relationship with the EU as well as a hawkish central bank that is pointing towards a mid-2025 easing of policy rates.

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