The GBP/USD pair experienced a positive boost, trading above 1.2900 on Tuesday, as the US Dollar faced challenges amid concerns about the Trump administration's trade policies potentially pushing the US economy toward a recession. Meanwhile, global markets reacted to various economic shifts and projections, including inflation adjustments and growth forecasts across Central and Eastern Europe (CEE). These developments come as Germany's Greens anticipate a spending deal this week, further influencing market sentiment and currency dynamics.
In Hungary, the most significant revision of headline inflation was recorded, with the 2025 average now projected at 5.0%, up from the previous estimate of 4.1%. This upward adjustment reflects broader regional trends, as average growth in the CEE region is expected to be 0.6 percentage points higher in 2025, reaching 2.6% compared to 2.0% in 2024. However, Croatia is anticipated to see a slight cooling off, while Slovakia is set to maintain a similar growth pace.
The improving market mood, coupled with a sustained weakness of the US Dollar and expectations surrounding Germany’s political developments, has supported the GBP/USD pair's upward trajectory. Additionally, gold prices have reversed Monday's decline, trading above $2,910 on Tuesday, further reflecting shifts in investor sentiment.
Inflation forecasts in Croatia and Poland have been revised upward by approximately 0.5 percentage points compared to expectations at the end of 2024. In Slovakia, inflation may rise to 3.7% in 2025 from 2.9% in 2024, driven by higher indirect taxes and energy prices. Notably, average inflation is projected to decline only in Romania and Serbia in 2025.
Economic forecasts for several CEE countries have been revised downward following disappointing fourth-quarter estimates for 2024. Hungary expanded by only 0.5% in 2024, underperforming expectations, while Romania's growth was limited to 0.9% despite strong real wage increases. Croatia and Serbia emerged as strong performers in 2024, each achieving close to 4% growth.
Looking ahead to 2025, GDP growth is expected to accelerate across all CEE nations except for Croatia and Slovakia. This projection reflects broader regional trends and economic adjustments that are shaping market expectations and investment strategies for the coming year.