Lira and CEE FX: Turkish Lira, Zloty, Forint — 2026-10-26
The Turkish Lira remains under pressure as the Central Bank of the Republic of Türkiye (CBRT) initiates its first rate cut in nine months, lowering the benchmark to 36%. Meanwhile, Central and Eastern European currencies, particularly the Polish Zloty and Hungarian Forint, are weakening against the dollar and euro due to geopolitical risks and domestic fiscal concerns. Analysts warn that continued rate cuts in Turkey may accelerate depreciation, while CEE markets brace for volatility ahead of key global central bank decisions.
Lira and CEE FX: Turkish Lira, Zloty, Forint — 2026-10-26
Top developments
Turkey cuts rates to 36%, sparking depreciation concerns
On October 22, 2026, the CBRT lowered its policy rate by 100 basis points to 36%, marking the first cut in nine months as inflation shows signs of easing. This move has raised concerns among economists that disinflation may not be genuine, with Commerzbank analysts warning that regional trends could be pro-inflationary, thereby increasing depreciation risks for the Lira. The decision occurred despite an ongoing $18 billion investment funds scandal, highlighting the government's priority to stimulate growth over strict monetary tightening.
Polish Zloty weakens to multi-month lows
The Polish Zloty has suffered significant losses, with the USD/PLN rate rising to approximately 3.93 and EUR/PLN approaching 4.40. Local media reports indicate that the currency is struggling against the dollar, euro, and Swiss franc, driven by geopolitical uncertainties and domestic inflation concerns. The weakening trend has raised questions about the National Bank of Poland's (NBP) ability to stabilize the currency without further monetary tightening.
Hungarian Forint hits three-week low against Euro
The Forint has continued its downward trajectory, with the EUR/HUF rate breaching the 367 level on October 26, 2026. Despite the government's announcements regarding the 2027 budget, the currency failed to sustain gains, reacting negatively to broader regional weakness. The Hungarian National Bank (MNB) maintained its base rate at 5.5% in October, signaling a wait-and-see approach amidst global volatility.
Local view
Turkish media outlets like Habertürk and Sözcü highlight the CBRT's focus on the "main trend of inflation" while acknowledging that high energy prices pose upward risks to the inflation outlook. Prof. Dr. Selva Demiralp from Koç University commented that the rate cut occurred "in the shadow of the fund crisis," suggesting political pressures may have influenced the timing. In Hungary, Index.hu argues that despite government interventions, the Forint has "slipped down the slope," with significant uncertainty remaining in the macroeconomic environment.
Context & numbers
The ECB reference rates for October 22, 2026, show the EUR/TRY rate at 49.7620, reflecting the Lira's gradual depreciation following the rate cut. ING forecasts the USD/TRY rate to reach 51.50 by the end of 2026 as rate cuts resume, indicating a continued downward trajectory for the Lira. The ECB also listed the EUR/HUF at 366.43 and EUR/PLN at 4.37 on October 22, providing a baseline for the subsequent weakening observed on October 26.
On the radar
- Global Central Bank Decisions: Markets are closely watching upcoming interest rate decisions from the Fed, ECB, and Bank of Japan this week, which are expected to influence asset prices and CEE currency volatility.
- Hungary's 2027 Budget: Investors are monitoring the implementation of Hungary's 2027 fiscal plan, which includes tax cuts and spending adjustments, to gauge its impact on the Forint's stability.
- Geopolitical Risks: Ongoing tensions in the Middle East and Europe continue to weigh on risk sentiment, potentially driving further safe-haven flows away from EM currencies like the Lira and Forint.
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