Turkey’s election race, CNB hawks, Hungary’s reforms

Opinion polls are painting a clearer picture of Turkey's election on 14th May, with an opposition victory looking more likely. This will offer a route to orthodox policymaking, but an Erdogan victory remains a high possibility and would increase the risk of a severe currency crisis. Meanwhile, the hawks at the Czech central bank were out in their numbers this week and the communications raise the chance of a rate hike in the coming months. We still think this is unlikely, but it's clear that policy will be kept tight until inflation falls to much lower levels. Elsewhere, Hungary's government passed key legislation this week to resolve its conflict with the EU over the rule of law. EU funds may be unlocked later this year, which would remove downside risks to growth and the forint.