From an economic perspective, apart from the ongoing drone incidents, the outlook for CEE currencies is likely to remain positive in the coming months and well into 2026. Relatively large wage increases are supporting consumption, while inflation, which has now fallen, remains at a slightly higher level. This makes it difficult for central banks to cut interest rates further. High interest rates are keeping currencies stable, provided they remain above the inflation rate.
Another effective factor is that Anglo-Saxon investors generally view CEE currencies as promising, given that real yields are positive and the USD is drifting towards negative real yields in the foreseeable future. Very little investment capital is needed to have a positive impact on CEE currencies, even if this has a negative effect on manufacturing companies in these countries.
Underestimated Currency Effects
In addition to the direct effects on currency, which every company seeks to control, there are also indirect effects that influence the behaviour of contractual partners. The behaviour of the USD may be irrelevant to processors of intermediate products because they do not export directly to the US. However, the costs incurred by the processor of intermediate products are relevant to the purchaser of the intermediate product, who is facing direct pressure from the devaluation of the USD. This purchaser will, in turn, exert pressure to reduce their purchasing costs.
The problem that companies face here is that margins are shrinking, yet there is no direct link between the problem and a solution. This means that any potential solutions are dismissed simply because they are labelled as speculative.
I agree that it seems speculative over long distances. However, I believe it is sometimes ignorant to ignore certain developments.
The World is Currently Undergoing Multiple Changes
An increasing number of countries are asserting their interests, or attempting to do so with vigour.
AI is changing many processes, which will lead to a different approach to dealing with employees.
The diversity of changes is likely to trigger disruptive events, and it will be necessary to respond to these appropriately. However, this will only be possible if two conditions are met.
- There is sufficient free cash flow to provide the necessary buffer to overcome lean periods, or to initiate speculative countermeasures in good time, in order to maintain favourable situations for as long as possible.
- The processes that have served as guiding principles over the past 15 years must now be thoroughly examined in light of the different circumstances and largely discarded.
It is also important to note that, compared to the previous 40 years, currency and interest rate fluctuations have been unusually mild over the past 15 years. If we return to more volatile times, as I expect, this will make the results of currency hedging more unstable overall. Today, we are experiencing more uncertainty and less scope for government intervention and support than in the past.
Entrepreneurs should acknowledge this as fact and think ahead. Those who do so and do not close their eyes to the facts will be very successful in times like these. This is because mistakes can be recognised and corrected.
