BofA: 'Iran/Israel ceasefire is bullish EEMEA FX'

BofA: 'Iran/Israel ceasefire is bullish EEMEA FX'

The analyst comments "Potentially higher energy prices were a big risk for EEMEA FX. But the Iran/Israel conflict seems to be over, for now, which opens the door for EEMEA FX appreciation. We remain structurally bullish EEMEA FX as unconventional and stagflationary policies, coupled with a faster US growth slowdown relative to the rest of the world, weaken broader USD. The next significant risk event for EEMEA FX is 9th of July tariff deadline. PLN (bullish): we see room for EURPLN to go lower as the USD weakens, albeit overvaluation should constrain the pace of appreciation.

ZAR (bullish): a weaker USD should strengthen the ZAR, as it is still one of the most undervalued EM currencies.

TRY (bullish): our forecast remains below forwards. Carry is still high and macro policies are supportive for continued adjustment. Current account seasonality is supportive for the TRY.

ILS (bullish): the apparent end of the Iran/Israel conflict opens the door to repricing of USDILS lower driven by a reduction in geopolitical risks.

CZK (bullish): EURCZK is likely to be below forwards as a weaker dollar provides support even if rates in Czechia do not reprice higher.

HUF (bullish): the forint should outperform forwards in the medium term as macro policies are supportive for a stronger forint. A weaker dollar should help.

Frontier FX: LKR, PKR, UZS, KZT and NGN should depreciate gradually, while pegs in RON and RSD are likely to be preserved. EGP should be range-bound from here."

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